China Resources split likely in wake of graft probe

May 09, 2014 14:20
China Resources faces an uncertain future following the graft investigation into its former chairman Song Lin. Photo: Bloomberg

Rather than pursue a business restructuring, state-owned China Resources (Holdings) Ltd. is likely to split into several units after a graft investigation was launched against its former chairman Song Lin, the 21st Century Business Herald reported Friday.

The group’s two listed subsidiaries, China Resources Sanjiu Medical and Pharmaceutical Co. Ltd. (000999.CN) and Beijing Double-Crane Pharmaceutical Co. Ltd. (600062.CN), announced they will undertake a major restructuring on April 8. However, the plan appears to have been shelved after the Commission for Discipline Inspection announced on April 17 that Song was under investigation on corruption charges.

The situation suggests a business split may become another option, the newspaper said.

Both stocks plummeted by nearly 10 percent in the first two trading days after they resumed trading on May 6.

The restructuring plan is still likely to proceed after Song's case has settled down, an unnamed senior executive at CR Pharma was quoted as saying.

However, a source at the parent company said the chance of China Resources being split into several companies still exists, adding that the government had in fact considered the plan before but had faced resistance from Song. The same source said the split may happen in units other than the group's pharmaceutical business.

China Resources currently owns seven major businesses, namely consumer products, electricity, gas, pharmaceuticals, finance, cement and real estate.

Amid the graft case involving its former chairman, the question has been raised whether a single parent company can effectively run such a colossal organization, the report said.

-- Contact us at [email protected]