Far Eastern to sell shares of PRC businesses in HK

Far Eastern Group (遠東集團), parent of the nation's largest textile maker, plans to sell shares of its Chinese retail, chemical and cement units in Hong Kong within two years to expand in China. The company's shares rose.

Far Eastern Department Stores Co (遠東百貨), Taiwan's largest publicly listed department store owner, may list its China operations, valued at as much as US$500 million, in Hong Kong next year, Far Eastern Department Stores chairman Douglas Hsu (徐旭東) said in an interview on Wednesday. Asia Cement Corp (亞洲水泥), the nation's second-largest cement maker, may raise US$250 million in Hong Kong next quarter, he said.

Far Eastern Group, whose operations also include shipping, seeks to use the Hong Kong share listings to avoid government restrictions on investments in China.

"The parent company is rich, but it's hitting the 40 percent limit," Hsu, 66, said at the group's Taipei headquarters. "If the 40 percent roof gets lifted, then the pressure is much less" to list shares overseas.

The group plans to offer an initial share sale of at least one unit a year as it expands in China, Hsu said.

Shares of Far Eastern Department rose 2.3 percent to NT$49.40 at the close of trade in Taipei, reversing an earlier 1.7 percent decline. Trading volume was more than double the stock's 90-day average.

Far Eastern Textile Co (遠東紡織), which owns 17 percent of the Department Stores unit, rebounded from a decline to add 2.7 percent to NT$51.20. The benchmark TAIEX rose 1.9 percent.

"If there's a listing for the subsidiary then there's a positive reaction in its share price," said Michelle Cheng, who rates Far Eastern Department shares a "buy" at BNP Paribas in Taipei. "It helps them get around investment rules."

Asia Cement's share sale in Hong Kong will be delayed until the second quarter from this quarter, Hsu said, citing declining stock markets. It will also trim the size of the sale to US$250 million from an earlier estimate of US$300 million, he said.

"In January and February there was a lot of cancelations because of the markets," Hsu said. "We are slightly late, but not that late."

Demand for new shares is waning in China and Hong Kong after companies raised US$127 billion in the two markets last year. In Hong Kong, the world's third-biggest IPO market last year, three offerings aiming to raise HK$9.4 billion (US$1.2 billion) were pulled this year as the benchmark Hang Seng Index sank.

Far Eastern Department Stores owns the Sogo chain of department stores in Taiwan and the Pacific Department Store group in China. The Taipei-listed unit is around 33 percent owned by Far Eastern Group companies.

A Chinese retail company approached Far Eastern for merger talks with the China department store unit, a move which would derail a listing, Hsu said. He declined to name the potential partner or whether they would proceed with the merger.

Far Eastern Polychem Industries Ltd (遠東化聚工業), the Chinese unit of Far Eastern Textile, will list in Hong Kong next year or early 2010, Hsu said. He declined to put a value on the company. Far Eastern Polychem previously traded on Hong Kong's Growth Enterprise Market (GEM) before it was delisted by Far Eastern Textile in November 2005.

"The GEM didn't quite work," Hsu said. We're "waiting for the chance to relist."

Hsu, chairman of eight companies in the Far Eastern Group, is listed this year at No. 31 on Forbes' rankings of the richest people in Taiwan, Hong Kong and China, with a net worth of US$1.4 billion.