Zoomlion Heavy Industry Science and Technology (000157) listed an 80 percent interest in Changsha Zoomlion Environment Protection Mechanical Equipment Limited at a base price of 3.2 billion yuan for sale on the Hunan United Asset And Equity Exchange, reports stcn.com, citing a company filing.

Market observers also suspect Hony Capital, a Zoomlion shareholder, and Changsha Hesheng Investment, in which shareholders of Zoomlion's parent also hold shares, will have an inside track on acquiring the stake.

Shen Ke, Zoomlion board secretary, said that the sale will be through an open auction with no interference in the transaction price.

The target firm generated net profit of 186 million yuan, 205 million and 363 million yuan during the 2009 to 2011 period, posting a growth rate of 10.2 percent and 77.1 percent in 2010 and 2011.

According to Shen, Zoomlion Environment Protection must switch from being an equipment producer to providing public utilities, and that the change is risky and requires a large amount of capital. However, Shen did say that the company, which is focused on the sanitation industry, has a bright future.

As the world’s eighth largest construction machinery producer, after the sale, Zoomlion's core business will remain manufacturing, and the company plans to increase profitability by improving the company's value chain, said Shen.

Zoomlion is looking to become the third largest construction machinery producer in the world in three to five years.

According to the filing, the base price represents a 15 percent premium over the target company's appraised value and a 90 percent premium of the book value.

Source:capitalvue.com