TCL Corp said its biggest shareholder will sell a 5 per cent stake in the company to Alliance Fortune International Ltd, after China's largest publicly-traded consumer electronics supplier scrapped a planned stock sale to company executives.

State-controlled Huizhou Investment Holdings Co last Thursday signed an agreement to sell 129.3 million shares to closely held Alliance Fortune after a board meeting, Huizhou, China-based TCL said in a statement to the Shenzhen stock exchange yesterday.

In December, Huizhou Investment said it planned to sell a 3.84 per cent stake to 89 TCL executives and 1.16 per cent, or 30 million non-tradable shares, to Alliance Fortune at 1.5816 yuan (20 US cents) apiece, a 32 per cent discount to the last traded price.

The stake sale to Alliance Fortune received approval from the State-owned Assets Supervision and Administration Commission and the Ministry of Commerce, yesterday's statement said.

Alliance Fortune is owned by Huang Yuesong and is registered in the British Virgin Islands with a capital of US$50,000, according to the statement.

TCL's parent is bringing in new shareholders as it prepares to make all the company's shares tradable under a government program aimed at converting more than US$200 billion of non-tradable stockholdings.

Royal Philips Electronics NV, Europe's biggest consumer electronics maker, on December 28 bought a 5 per cent stake in TCL at 1.5816 yuan a share.

Non-tradable shares account for almost two-thirds of China's stock market capitalization. Major shareholders are offering stock, cash or warrants to small investors to compensate them for the increased supply of shares.

TCL shares, which fell 35 per cent in 2005, have been suspended since December 9, pending shareholder approval of the stock conversion plan. They last traded at 2.34 yuan (29 US cents).

Holders of non-tradable stock, including Philips and Alliance Fortune, will have to participate in the compensation being offered to TCL's tradable shareholders, raising their cost per share to 1.87 yuan (23 US cents), TCL executive He Zhihua said last month.

Holders of TCL's local-currency A shares have been offered 2.5 shares for every 10 held, TCL said on November 28.

The share disposal was approved by two-thirds of holders of tradable shares at a December meeting held in Shenzhen.

The company reported a nine-month loss of 1.2 billion yuan (US$150 million), compared with a profit of 407.5 million yuan (US$50.31 million) a year earlier.

It forecast a loss for the year. TCL is slated to report 2005 earnings on April 29.

Source: China Daily