31st Mar 2015 11:21
LONDON (Alliance News) - LED International Holdings Ltd on Tuesday said it is to pull out of a deal to acquire Shenzhen Ruihetai Industry Co Ltd and will instead enter a joint venture with the company, as its pretax loss narrowed in the first half on the back of better revenue.
The Hong Kong-based energy management contractor said the legal and regulatory implications of conducting a reverse takeover of Shenzhen Ruihetai mean it has decided against pursuing the acquisition and will instead establish a joint venture with the company.
LED said new legislation in China means that should it conduct the reverse takeover, it would increase the risks it faces in pursuing the deal under a variable interest equity arrangement. This arrangement has been used by a number of companies operating in China in recent years in order to allow foreign investments within certain restricted industries. The new legislation would retrospectively invalidate the structure of the acquisition, LED said.
Instead, LED has formed a joint venture with Shenzhen Ruihetai to create a new distribution business.
In a separate statement Tuesday, LED also said its pretax loss narrowed to HKD5.4 million in the six months to the end of December from HKD8.5 million. Revenue rose to HKD12.4 million from HKD10.8 million amid solid growth in the Chinese market.
Shares in LED were down 16% to 90.00 pence on Tuesday, one of the worst performers in the AIM All-Share.
By Sam Unsted; [email protected]; @SamUAtAlliance
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