News Releases / 2013
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July 31, 2013
Rengo Announces the Transfer of Equity Resulting
in Changes to SubsidiariesRengo Co., Ltd. (Head Office: Kita-ku, Osaka; President & CEO: Kiyoshi Otsubo) announces that it has concluded an agreement to transfer a portion of its equity in its two consolidated subsidiaries Zhongshan Rengo Hung Hing Paper Manufacturing Co., Ltd. and Zhongshan Ren Hing Paper Manufacturing Co., Ltd. (both Head Office: Zhongshan, Guangdong, China; hereinafter referred to as “the two Zhongshan companies”), to Zhongshan Yong Fa Paper Co., Ltd. (Head Office: Zhongshan, Guangdong, China) which was approved by the Rengo Board of Directors meeting on July 31, 2013. Consequently, the two Zhongshan companies will shift from being Rengo's consolidated subsidiaries to become affiliates accounted for using equity method. This transfer is subject to the approval of the regulatory authorities, including the Ministry of Commerce of the People's Republic of China.
1. Reasons for the Change
As a result of Rengo's subscription to shares for capital increase in the two Zhongshan companies in January 2011, they became subsidiaries. Since then ongoing efforts have been made including facility remodeling and productivity improvement. However, due to weakening market conditions they have suffered a deficit balance since 2008.
Amidst these circumstances, Zhengye International Holdings Co., Ltd. (Head Office: The Islands of Bermuda, a British Overseas Territory)—a listed company on the Hong Kong Stock Exchange that is the parent company of Zhongshan Yong Fa—approached Rengo about participating in the management of the two Zhongshan companies. Rengo decided to transfer the majority of its equity.
After the equity transfer Rengo will continue to finance the two Zhongshan companies, and will work together with Zhongshan Yong Fa to improve their business value.
2. Change Process
The transfer to Zhongshan Yong Fa will be completed subject to the approval of the regulatory authorities, including the Ministry of Commerce of the People's Republic of China.
Reference:
Changes in Equity Holdings in the Two Zhongshan Companies
Shareholder Equity ratio
before transferEquity to be
transferredEquity ratio
after transfer
Rengo Co., Ltd. 62.764% -32.764% 30.000% LeMond Inc. 15.360% -15.360% -- Hung Hing Printing Group Limited 11.283% -7.522% 3.761% Zhongshan Hung Hing Printing &
Packaging Co., Ltd.7.522% -- 7.522% Homegrace Consultants Ltd. 3.072% -3.072% -- Zhongshan Yong Fa Paper Co., Ltd. -- +58.717% 58.717%
Total 100.000% -- 100.000% 3. Schedule
1) Date of approval at
the Rengo Board of Directors meetingJuly 31, 2013 (2) Agreement conclusion date July 31, 2013 (3) Equity transfer date Around January 2014 (scheduled)
4. Future Outlook
The transfer is expected to have only a minor impact on Rengo's consolidated and unconsolidated financial results.