China Resources Calls Media Reports on Purchase ‘Slander’

The parent of China Resources Power Holdings Co. (836) said media reports on a purchase for which the unit allegedly overpaid are full of “speculation, assumption and malicious slander.”

The reputation of the company and its leader have been “negatively affected” by the reports, Hong Kong-based China Resources Holdings Co. said in a statement on its website yesterday. The company said it reserves the right to pursue legal remedies over words and actions that denigrate and slander its reputation.

Hong Kong-listed China Resources Power fell the most in more than two months yesterday after the official Xinhua News Agency posted a letter on its website by one of its reporters that said the power generator and the chairman of its state-owned parent intentionally overpaid for a 2010 purchase.

The shares fell 10 percent to close at HK$17.98, their biggest drop since May 10. The city’s benchmark Hang Seng Index was little changed. China Resources Power is unaware of the reason for the change, it said in a statement to the Hong Kong stock exchange yesterday.

The letter written by Xinhua reporter Wang Wenzhi said the parent’s Chairman Song Lin overpaid when China Resources Power spent 7.9 billion yuan ($1.3 billion) for an 80 percent stake in coal-mine assets in Shanxi province that another party valued at half the price, according to the letter.

“It’s rare for a state-owned news agency or its reporter to take on another state-owned company in such a dramatic way,” said Shi Yan, an analyst at UOB-Kay Hian Ltd. in Shanghai. “Some investors could just be too scared to continue to hold the stock.”

Reporter’s Letter

Xinhua reporter Wang’s letter was first posted at Xinhuanews.net and later picked up by Chinese news portals including Sina.com and Sohu.com. He wrote that another company had offered 5.2 billion yuan for the entire asset a few months before the China Resources bid.

“Chairman Song Lin and other senior management intentionally overpaid Shanxi Jinye Group’s assets in a 10 billion-yuan acquisition in 2010, causing billions of yuan of losses in state-owned assets,” Wang wrote in the letter. He didn’t respond to an e-mail seeking comment yesterday.

To contact Bloomberg News staff for this story: Aibing Guo in Hong Kong at aguo10@bloomberg.net; William Bi in Beijing at wbi@bloomberg.net

To contact the editor responsible for this story: Andrew Monahan at amonahan@bloomberg.net

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