DEG buys share in private company
By Chen Qide (China Daily)
Updated: 2004-04-23 08:38

DEG, the German Development and Investment Company, announced yesterday that it purchased a 10 per cent share in Zhejiang Cixi Hengtong Property Co Ltd, making it the first privately listed Chinese firm DEG has become involved in.

The 16.43 million non-tradable legal person shares, costs DEG 60.59 million yuan (US$7.3 million).

The Haitong Group, with Hengtong as its largest shareholder, claimed to have sales of 300 million yuan (US$36 million) and total assets of 620 million yuan (US$75 million) last year.

"We feel proud to contribute to the future development of Haitong and support it in strengthening its position in the international market," said Johannes-Jurgen Bernsen, member of the Board of Management of DEG.

Companies like Haitong, one of China's leading modern food processing companies, have been targeted by the Chinese Government to initiate business activities in rural areas, Bernsen said.

"With our long experience in argibusiness, we can help it grow faster," he said.

DEG considers the acquisition of shares as an effort to expand its business in China. It is now seeking the possibility of buying shares from a paper company in Jiangxi Province as a second step, said Jochen Steinbuch, vice-president of Portfolio Management of DEG.

"Negotiations are underway, but no details are available at the moment," Steinbuch said.

He said DEG does not usually purchase more than a 25 per cent stake in the enterprise it has targeted.

He said DEG is expected to purchase a very small share in the Jiangxi company.

As a financial company, DEG will give technical and management support to Haitong after the acquisition to help it further enlarge its overseas market, Steinbuch said.

Haitong produced more than 200,000 tons of processed food products with vegetables and fruits last year that were exported to the US, Japan, Europe and other countries, said Chen Longhai, chairman of Haitong Group.

"With DEG as a strategic partner, Haitong is able to enlarge its markets in Europe," Chen said.

Over the past two years, it has invested more than 200 million yuan (US$24 million) in expanding its production capacity.

"We have a plan to develop our business in Shanghai by building a new factory in the Songjiang District soon," said Zhou Lequn, general manager of Haitong Food Group Co Ltd.

The factory will be a joint venture with a foreign partner to process and package vegetables, fruits and pastries mainly for the domestic market. The investment is expected to reach 50 million yuan (US$6 million).

DEG's current portfolio in China amounts to 155 million euros (US$187.7 million).

DEG had, in the beginning, accompanied mainly German medium-sized companies into the Chinese market, which regard China as the most promising emerging market worldwide, Bernsen said. It then began providing financing to Chinese companies.

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