Shares in China Shipbuilding Industry Company Limited jumped more than 16 percent on Monday compared with its opening price on Jan. 20, following good performance expectations and the approved non-public offering plans for A shares.
China Shipbuilding Industry Company Limited plans to raise 8.4 billion yuan ($1.4 billion) through a non-public offering, according to China's Securities Daily.
The fundraising plan was approved by the China Securities Regulatory Commission on Jan. 7. The company has planned to buy two sibling companies, Dalian Shipbuilding and Wuchang Shipbuilding, which are key builders of Chinese warships.
China Shipbuilding Industry Company Limited and its controlling shareholder China Shipbuilding Industry Co Ltd (CSIC) are China's key suppliers of naval ships and equipment. More than 80 percent of the country's naval battle equipment is developed and produced by the two enterprises.
After completing the acquisition, China Shipbuilding Industry Company Limited will restructure its naval equipment business and optimize its industrial structure. It will also be less dependent on the civil ship sector and boost its military equipment business. The revenue from the military industry is expected to increase greatly and account for more than 20 percent of its profit in 2014.
The deal would herald an overall securitization of China's military assets. Military asset securitization will be the future trend of the international capital market as well as the reform of China's national defense industry. It will expand financing channels for national defense development and promote coordinative development of military and civil industries in the country.
In 2012, China pledged to further open its defense-related industries to private capital in a "fair and safe manner."
Private investors and state-owned military enterprises will receive equal treatment in multiple areas, including licensing and taxation, said a guideline jointly created by the central government's defense industry supervisor and the General Armament Department of the People's Liberation Army.
