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| Kelon Shares Suspended Pending Announcement |
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Trading in troubled home appliance maker Guangdong Kelon Electrical Holdings’ yuan-denominated A shares was suspended Friday pending the release of “price-sensitive” information. Kelon said in a statement that trading will resume once the information is disclosed, but the Domestic newspaper reports speculated that the trading suspension is probably related to the transfer of a stake to Qingdao Hisense Air-Conditioner, which is 93 percent owned by major domestic television maker Qingdao Hisense Group. Hisense has been seeking to obtain a controlling 26.43 percent stake in Kelon from former Kelon chairman Gu Chujun, who, along with several other executives, was detained last year amid allegations of embezzlement of Kelon’s funds to buy other companies and providing fake financial reports. According to an agreement signed last September with Gu’s flagship enterprise Guangdong Greencool Enterprise Development Co., Kelon’s largest shareholder, Hisense offered to take the 26.43 percent stake in Kelon for 900 million yuan (US$111.11 million). On completion of the deal, Hisense would become the largest shareholder in Kelon. But recent market rumors have swirled that Hisense has decided to cut its offer price after auditing firms have found that Kelon’s assets were worth much less than expected. Kelon is one of the highest profile victims of a brutal price war in a domestic appliance sector crowded with dozens of aggressive players. It posted a net loss of 44.7 million yuan for 2004 after reporting profit of 84.2 million yuan for 2002 and 197.3 million yuan for 2003. In another development, the securities regulator is likely to hold an administrative hearing April 7 to investigate whether Kelon’s former auditor Deloitte & Touche had a role in an accounting dispute involving Kelon. Deloitte, which audited results for Kelon for the financial years from 2002 to 2004, also faces a lawsuit filed by an unnamed shareholder in Domestic newspaper reports said Thursday that the investor is seeking an apology from Deloitte, 495 yuan in compensation for financial losses associated with his purchase of 200 shares of Kelon stock and the recovery of his legal fees. (Shenzhen Daily April 3, 2006)
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