On Feb. 18, China railway construction corporation LTD. (CRCC) announced that it had received approval from the Hong Kong stock exchange for a major, long-planned spinoff. The plan will have a significant impact on China's railway construction and beyond.
China railway construction co. 's spinoff does not really split the company into two, but rather splits the assets of a key subsidiary, China railway construction heavy industries co., which would then issue shares publicly and list them on the Shanghai stock exchange's science and innovation board. It is actually a subsidiary of China railway construction. That sounds a little convoluted. But for China railway construction is a major move, for the railway construction heavy industry is also a very good.
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CRCC is a company listed on both the Shanghai and Shanghai stock exchanges. China railway construction heavy industries co., ltd. is a subsidiary of China railway construction co., LTD., with a registered capital of 3.8554 billion yuan. In other words, China railway construction is in fact a 100 percent shareholder of the company.
So why did CRCC spin off the company?
The company is engaged in the design, research and development, manufacturing and sales of Roadheader equipment, rail transit equipment and special professional equipment. The business segment mainly includes Roadheader equipment, rail transit equipment and special professional equipment. To put it simply, China railway construction is a construction-oriented infrastructure enterprise, while China railway construction heavy industry is an industrial enterprise mainly engaged in equipment manufacturing. In the capital market, the valuation level of equipment manufacturing enterprises is often higher than that of construction enterprises. However, due to the huge volume of China railway construction, in the plate of China railway construction, the heavy industry looks very small. In this way, the capital value of the company, which could have been slightly higher, could not be shown.
So China railway construction will simply separate out the construction works, and let it issue shares independently listed, so that the iron construction heavy industry more valuable. Especially if in the magic board of science and innovation listed, there will be more value-added. That would raise the value of China railway construction's stake in China railway construction heavy industries. At the same time, it has independent access to the capital market and can also raise a lot of real money directly. This is really a good way to kill many birds with one stone.
As early as June 2018, China railway construction had planned to spin off the company to list its shares on the main board of the Hong Kong stock exchange, known as the h-share. In 2019, with the completion and clarification of the provisions for the spin-off and listing of a-shares, CRCC shifted the listing target of China railway construction heavy industry from h-shares to a-shares. Later, when the board of science and technology innovation came, CRCC pointed to the board of science and technology innovation again.
If the listing succeeds, the Shanghai stock exchange could see both China railway construction and China railway construction heavy industries go public at the same time. This is similar to China railway and China railway industry listed at the same time, but not the same. Although now China railway and China railway industry are listed in A shares at the same time, in fact, China railway industry (previously China railway second bureau) listed first, China railway listed later. If CRCC and CRCC go public at the same time, CRCC goes public first, and CRCC goes public later.
As a result of the previous spin-off listing was once considered as a Repeat marketing ” In December 2019, the China securities regulatory commission (CSRC) approved the spin-off and agreed to start a trial. Therefore, China railway construction to spin off the construction of iron heavy industry is the first shot A shares split listing. The fact that China railway construction can launch a spin-off listing so quickly also reflects the capital operation strength that China railway construction cannot be underestimated.
