China Shipbuilding Industry Co., the country’s biggest maker of vessel equipment, jumped in Shanghai trading after agreeing to buy seven affiliates, including makers of torpedoes and submarine telescopes.
The company rose 5.1 percent to close at 13.86 yuan, as it resumed trading following an almost monthlong suspension. The benchmark Shanghai Composite Index fell 0.1 percent.
China Shipbuilding plans to raise as much as 12.5 billion yuan ($1.9 billion) in a stock sale to help fund the acquisition and projects including making equipment for nuclear-powered vessels, it said in a statement today. The deal may boost earnings about 20 percent this year, said Zhen Yi, an analyst at China Jianyin Securities Co. in Shenzhen.
“Supplying the navy will fuel future growth,” Zhen said by phone. She has a ‘buy’ rating on Beijing-based China Shipbuilding.
China plans to spend 601.1 billion yuan on defense this year, Li Zhaoxing, a spokesman for China’s National People’s Congress, said last month. That’s an increase of about 13 percent. The country has the world’s second-largest defense budget behind the U.S.
China Shipbuilding will sell as many as 1 billion new shares at no less than 12.44 yuan each in a private placement, according to the statement. That’s 5.7 percent lower than the last closing price on March 17. The new shares will be bought by parent China Shipbuilding Industry Corp., the nation’s largest supplier of naval products, and nine other institutional investors, according to the statement.
The acquisition will also include an engine-parts maker and a research unit, the statement said. China Shipbuilding also completed the purchase of four shipyards from its parent in February.
China has encouraged state-owned companies to sell assets to listed units to boost financial transparency. SAIC Motor Corp., the nation’s largest carmaker, this month agreed to buy partsmakers and other businesses from its state-controlled parent in a deal worth about 34 billion yuan.
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