Huafeng Group Holdings Ltd., a Hong Kong-based fabric processor, agreed to pay HK$2.49 billion ($321 million) to buy an oolong tea producer in China from people connected to its controlling shareholder.
The company will pay for the purchase with HK$193.9 million in cash, HK$1.68 billion in new shares and HK$614.8 million in 4 percent, 30-month convertible bonds, according to a statement to the Hong Kong Stock Exchange yesterday.
Huafeng said on Dec. 12 that “difficulties in the textile industry in China continue,” it may record a “substantial” net loss for 2012 and it was seeking mergers and acquisitions in order to diversify. The company last year allowed the proposed purchase of a gold mine in China to lapse.
The targeted tea producer’s 2011 after-tax profit gained 53 percent from a year earlier to 194.3 million yuan ($31.2 million), according to yesterday’s statement. The sellers include people who are connected to Huafeng’s controlling shareholder Cai Zhenrong, according to the filing.
Shares in Huafeng, suspended yesterday, will resume trading in Hong Kong today. The stock has gained 56 percent in the past 12 months, compared with a 19 percent gain in the city’s benchmark Hang Seng Index.