Troubled Guangdong Kelon Electrical Holdings Co. Ltd. said Monday Qingdao Hisense Air-conditioner Co. Ltd. had proposed an asset restructuring that included the transfer of Hisense's refrigerator business to Kelon.

As part of the proposal published on the Web site of the Shenzhen Stock Exchange, Hisense would also transfer its air-conditioner and related business to Kelon in return for Kelon's assets in manufacturing of molds, accessories, and small household appliances, Kelon said in a statement.

But Kelon said it had not yet entered into any discussion with Hisense in relation to the proposal.

"As stated in such future business plan, there will not be material change to the principal business of the company, which is the manufacturing and sales of refrigerators and air-conditioners," Kelon's vice chairman Liu Congmeng said in the statement.

In September, Hisense Group's 93 percent owned air-conditioner arm agreed to take over Guangdong Greencool Enterprise Development Co. Ltd.'s 26.43 percent stake in Kelon for 900 million yuan (US$111 million). On completion of the deal, Hisense would become the largest shareholder in Kelon.

Kelon said in the latest statement that the deal was subject to official approvals, including State Investment Committee of Qingdao City and Ministry of Commerce.

Trading in H shares of Kelon, suspended since June 16, remained suspended pending a further statement.

Kelon is one of the highest profile victims of a brutal price war in a domestic appliance sector, with dozens of aggressive players. It began haemorrhaging money in 2000.

Earlier this year, police began investigating its chairman, Gu Chujun, and four other executives over alleged "economic crimes." Hong Kong media said he was suspected of embezzlement.

The company later sacked Gu, a 46-year-old self-made tycoon.

(Shenzhen Daily October 18, 2005)