2011-09-08 11:09

City puts parent group up for sale at an asking price of 5.1 billion yuan

SHANGHAI - The Shanghai-based leading cosmetics company Shanghai Jahwa United Co Ltd (SJU) resumed trading on Sept 7, ending a suspension that began on Dec 6 for a group restructuring.

Its parent company, Shanghai Jahwa (Group) Co Ltd (SJG), announced on Tuesday night that the State-owned Assets Supervision and Administration Commission of the Shanghai Municipal Government would sell its entire 100 percent stake in the group.

The stake was listed on Sept 7 on the Shanghai United Assets and Equity Exchange at 5.109 billion yuan ($800 million). The listing period ends Sept 20.

According to SJG's announcement, the buyer or its parent holding company must have total assets of at least 50 billion yuan.

Also, the buyer and its affiliated enterprises should not be direct competitors with SJG, and no joint bids would be accepted.

SJG is also involved in the chemical, pharmaceutical and mineral water businesses.

About 25 private equity or venture capital funds, both domestic and foreign, "have been showing interest in our group. But their scale is only around 1 billion yuan, which is way too small for us," said Ge Wenyao, chairman of SJU.

"Corporate entities are our first choice. Therefore, we set a threshold of 50 billion yuan, which seems a little bit high," said Ge.

Ge added that the result would be released within 20 business days if there was only one bidder. If there were multiple bidders, the result won't be released until next month, he said.

After the Chinese skin brand Mininurse was taken over by L'Oreal in 2003 and Beijing Dabao Cosmetics Co Ltd was acquired by Johnson & Johnson Services Inc in 2008, the number of Chinese cosmetics brands dwindled.

But Ge said there was another condition to the sale: only a domestic buyer would be accepted.

"The company that would like to acquire Jahwa the most is Procter & Gamble Co. But we will never give our company to this giant," said Ge.

"The Singaporean government investment company Temasek Holdings also approached us. But after we made it clear that foreign capital was not being considered", we didn't hear further from them, he said.

In early June, SJU rebutted media reports that it could be acquired by the French luxury brand LVMH Group, saying that the State-owned cosmetics maker would remain domestically owned.

SJU shares slumped at the opening on Wednesday, plummeting by 9.95 percent in the morning session, very close to the daily trading limit. They closed at 34.2 yuan, down 7.27 percent.

But Ge said he wasn't concerned about the share performance, saying that purchases of the stock on the first trading day after the suspension amounted to 639 million yuan.

According to the London-based research company Euromonitor International, SJU was ranked 10th in China in overall beauty and personal care products in 2010 with a market share of almost 2 percent.

SJG's stake in the listed company was valued at about 120 million yuan as of June 30.