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AJ Corp to raise 2.6b yuan through private placement

By Tang Zhihao (China Daily)
Updated: 2009-08-13 11:30

Shanghai-based financial investment firm AJ Corp said yesterday that it intends to raise 2.6 billion yuan ($380 million) through a private placement to acquire two property companies under the Shanghai International Group.

SIG is considered to be the investment arm of Shanghai municipal government and has interests in industries like property development and securities trading.

AJ said it would issue 214 million shares to SIG to buy entire stakes in the two property companies. The additional shares will be priced at 12.21 yuan per share.

The troubled AJ has been seeking a restructuring partner since 2004, but abandoned the plan three times before joining hands with SIG. The most recent plan was suspended as project managers in its trust unit were suspected to be involved in economic crimes. The three managers were believed to have siphoned off funds to the tune of 6 billion yuan at a property development project in Harbin.

AJ has obtained preliminary approval from related Shanghai municipal government departments and is now waiting for the final approval from China Securities Regulatory Commission.

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The company also plans to issue 700 million yuan worth of new shares in another private placement to the Shanghai International Group to increase the capital of its trust unit.

The second placement will upgrade the qualification of the AJ trust unit and expand the trust service range. The additional shares are valued at 10.99 yuan per share.

Shanghai International Group will hold 20.67 percent stake in AJ Corp after the first placement and become the largest shareholders within the group. SIG has promised not to engage in property development after the two property companies are merged into AJ.

AJ shares have been suspended for more than one month and rose to their daily 10 percent limit after the trading resumed yesterday morning and closed at 14.53 yuan.

"The acquisition of the two property companies could optimize AJ's balance sheet and add credibility in the asset valuation process. The advance revenues generated by the two companies have reached 2.28 billion yuan, which is expected to make significant contributions in improving the financial performance of the group," Sun Jian, analyst, Shenyin Wanguo Securities said.