Recently, China Oils and Foodstuffs Corporation (COFCO) kicks off the mixed ownership reform of COFCO Capital Investment Co., Ltd., which is a subsidiary under financial sector of COFCO. It plans to introduce social capitals and employee shareholding plan through adding registered capitals and selling shares, marking that COFCO accelerates mixed ownership reform.
COFCO unveiled its goal not long ago that it strives to reform 18 professional companies and introduce strategic investment to these companies so as to make these companies listed by 2018. COFCO Capital Investment is one of the 18 professional companies and the company’s senior management disclosed that the company intends to go public through launching IPO or restructuring at proper timing during the period of 13th Five-Year Plan.
National Development and Reform Commission (NDRC) has basically approved the proposals about mixed ownership reform pilot of 9 firms in the first batch. The list of 10 piloting enterprises in the second batch has been decided, and the NDRC plans to give approval soon. It has begun work on selecting the third batch of piloting enterprises. There are enterprises in important commodity fields among the 19 piloting enterprises in the first and the second batches. Therefore, moves of central state-owned enterprises (SOEs) such as COFCO and China National Salt Industry Corporation attract much attention.
“With promotion of mixed ownership reform quickened, central SOEs are expected to make substantial progress in mixed ownership reform in the future”, said some researchers on state-owned assets.
Over half of 8 billion yuan to be raised from social capitals
China Beijing Equity Exchange disclosed registered capitals increase project of COFCO Capital Investment on April 19. COFCO Capital Investment plans to raise 8 billion yuan, more than 50 percent of which will be raised from non-state-owned capital or social capitals.
At present, the amount of registered capitals of COFCO Capital Investment is 1 billion yuan and the company is totally controlled by COFCO, whose legal representative is Wu Xiaohui. The aim of COFCO adding registered capitals is to supplement operating capitals and increase registered capitals of its subordinated enterprises. According to the plan, after increasing the registered capitals, the company’s shareholder COFOC will hold at least 61 percent equity in the company and new shareholders will totally have 39 percent equity at most, about 5 percent of which will be held by employee shareholding plan.
Information shows that established in June 1997, COFCO Capital Investment is a professional platform in financial business of COFCO and its businesses cover trust, futures, insurance, banks and funds. By the end of 2016, total assets and net assets of the company were 46.944 billion yuan and 15.381 billion yuan respectively. It achieved 7.35 billion yuan of operating revenues and 1.27 billion yuan of net profits in 2016. Its net profits recorded 936 million yuan and 10,754,400 yuan in 2015 and 2014 respectively. Its profits see remarkable increase in last three years.
According to the announcement, after gaining additional funds, COFCO Capital Investment will offer several seats of directors and supervisors in view of investment amount of investors, strategic collaboration with financing party and the support in business of the financing party. In addition, employee shareholding plan will be implemented after approved by related departments and won’t take part in transactions in exchange.
COFCO has the following requirements on investors. The amount of paid-in registered capitals of intentional investors or their controlling shareholders should not be less than 2 billion yuan, or the amount of assets managed by intentional investors or their fund managers should not be less than 20 billion yuan. Joint investment is not accepted and any investors should invest 800 million yuan at least. Investors are not allowed to sell the stocks in 4 years at least and investors are not changed in 4 years.
At the same time, COFCO also provides some preferred conditions. Intentional investors with background in agricultural industry, or experience in the mixed ownership reform of SOEs, or experience in investment management in financial industry are preferred.
“The plan introduces private-owned capitals and employee shareholding plan as well. It can be said to be a highlight of the reform.” Researchers on state-owned assets viewed that “with promotion of mixed ownership reform quickened, central SOEs are expected to make substantial progress in mixed ownership reform in the future.”
Noticeably, as one of the first batch of enterprises piloting mixed ownership reform, Eastern Air Logistics Co., Ltd. (EAL) under China Eastern Air Holding Company also activated mixed ownership reform plan by introducing external investors and employee shareholding plan on April 19. According to the plan, after the mixed ownership reform is finished, the shareholding proportion of China Eastern Air Industry Investment Co., Ltd. will decrease from 100 percent to 45 percent; non-state-owned strategic investors and financial investors will totally have 45 percent of equities and the remaining 10 percent will be held by core employees.
Mixed ownership reform of 18 professional firms on the way
COFCO put forward its goal of mixed ownership reform in February. It aims to advance mixed ownership reform of three professional companies including COFCO Feed Co., Ltd, COFCO Wines & Spirits Co., Ltd. and China Tea Co., Ltd this year, and strives to reform 18 professional companies and introduce strategic investment to these companies so as to make them listed by 2018.
The 18 professional companies include: COFCO International (Beijing) Co., Ltd., COFCO Trading Co., Ltd., COFCO Oils (Qinzhou) Co., Ltd., COFCO Grains & Cereals Co., Ltd., COFCO Biochemical Co., Ltd., COFCO Feed, COFCO Tunhe Sugar Co., Ltd., Chinatex Corporation, COFCO Engineering & Technology Co., Ltd., COFCO Wines & Spirits, COFCO Coco-cola Co., Ltd., COFCO Meat Co., Ltd., China Tea, Mengniu Dairy Co., Ltd., Womai.com, CPMC Holdings Limited, COFCO Capital Co., Ltd. and COFCO Land Co., Ltd. It is learnt that most of the 18 firms have carried out mixed ownership reform.
Officials from COFCO indicated that the group will pay attention to different ways of the reform. Core business of grain, oil, sugar and cotton will achieve mixed ownership reform through holistic listing so as to maintain the necessary control of state-owned capitals. Other businesses particularly brand and foods can undertake the reform through introducing strategic investors besides launching IPO. It is noteworthy that shareholding proportion in this kind of market-based business can be reduced to the proportion of majority shareholding and employee shareholding plan should be pushed forward under mature conditions.
According to the 13th Five-year Plan proposed by COFCO last year, the group intends to push forward holistic listing of oils, foods, finance and real estate sectors. the group’s vice-president Wu Xiaohui said to the media that COFCO Capital Investment wanted to go public through launching IPO or restructuring at proper timing during the period of 13th Five-Year Plan.
Another central SOE China National Petroleum Corporation (CNPC) finished listing and mixed ownership reform of its financial sector at the beginning of this year. Jinan Diesel Engine Company Limited was changed to be CNPC Capital Company Limited. Specifically, CNPC put all of the businesses of its financial sector to CNPC Capital and then injected CNPC Capital into Jinan Diesel Engine. Besides, it introduced investors such as CSCEC Capital Holdings Co., Ltd., Aisino Corporation, AECC Commercial Aircraft Engine Co., Ltd., Beijing Gas, venture capital fund for state-owned capital, China Shipping Container Lines Company Limited, Citic Securities Company Limited and channel energy industry fund.
Will COFCO Capital Investment become another CNPC Capital? It is worthy of market concern.
Translated by Vanessa Chen
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