Beijing-based electronics company BOE Technology Group Ltd plans to spin off its subsidiary in the Republic of Korea (ROK) on a separate overseas listing in a move which it hopes will raise much-needed capital for further expansion.

Shareholders in the Shenzhen-listed firm will meet on March 30 in Beijing to discuss a plan to list its ROK subsidiary BOE Hydis on overseas markets, the firm said in a statement Wednesday in official Chinese securities publications.

"We do not have a timetable for that listing, it depends on the regulatory procedures of the country where BOE Hydis intends to make an initial public offering (IPO), as well as the atmosphere of capital markets," said Zhong Huifeng, BOE board secretary.

The company would consolidate the assets of BOE Hydis, Zhong said in a telephone interview.

Capital raised from the public offering will be used to fund its thin film transistor liquid crystal display (TFT-LCD) production base in Beijing. The company had not yet decided on where to make the IPO and how much will be raised from it, he added.

As a part of the consolidation, BOE Hydis will transfer its 25 per cent stakes in Beijing BOE Optelectronics Co Ltd, a joint venture with its parent firm, to BOE Optelectronics Holding Co Ltd, a British Virgin Islands-registered company.

Although BOE's shareholder equity in BOE Hydis, which accounts for 40 per cent of BOE sales, will fall after the latter's listing, Zhong believed the move will be good for BOE's development.

The company is building the first fifth-generation TFT-LCD line in China, the first phase of which is expected to cost about US$1.2 billion and is due to start operations in the first quarter of 2005.

Although the cutting-edge line is supported by the central government, the Beijing municipal government and banks, the company is thirsty for more capital.

China Securities analyst Dong Zhiqiang pointed out that although it got about US$700 million in bank loans, it still needs to make up the rest and reduce its ratio of liabilities to assets.

Zhou Qiang from Shenzhen-based China Merchants Securities estimated BOE's ratio of liabilities to assets is about 70 percent.

BOE acquired Hydis, the TFT-LCD unit of ROK semiconductor company Hynix, last January for US$380 million.

In August, BOE also bought 23 percent of Hong Kong-based computer monitor maker TPV Technology Ltd for HK$1.05 billion (US$127 million).

The spending spree forced BOE to seek other sources for its capital.

The Chinese electronics company issued 316.4 million new HK$-denominated B shares in January and raised HK$1.92 billion (US$246 million) in net proceeds.

The company said in yesterday's statement that it would use US$90 million to pay loans borrowed for the Hydis acquisition and US$22.35 million for the Beijing TFT-LCD project. Another US$85 million will be used to pay loans in the TPV deal and US$50 million will pay other bank loans.

The BOE Hydis IPO will reduce BOE's ratio of liabilities to assets and bank interests, said Zhou Qiang from China Merchants Securities.

Zhong was confident that investors will be convinced by TFT-LCD's growth prospects and BOE's ability to win a position in the industry.

Zhou Qiang also pointed out that the listing of Shanghai-based Semiconductor Manufacturing International Corp (SMIC) in New York and Hong Kong will also help BOE win favor from investors in Chinese semiconductor companies.

SMIC is expected to rise as much as US$15. billion from a dual listing on the two markets on or around March 18, which were said to be well received by investors at a roadshow in Hong Kong.

(China Daily February 26, 2004)