Hong Kong stock exchange blocked China Baoli from increasing share in Yota Devices

Yotaphone

China Baoli has canceled the acquisition of 25.1% stake in Yota Devices, according to documents published by the Hong Kong stock exchange. China Baoli already owns 40% of Yota Devices and as a result of the transaction would become the largest shareholder of the company.

The controlling stake in Yotaphone manufacturer has long belonged to the Russian state Corporation “Rostec”. Back in December 2017, Rostec announced its intention to sell it to a consortium of Chinese investors for 3 billion rubles (at that time — about $51 million).

The completion of the transaction became known from the documents of China Baoli: as of July 5, 2018, Trinity World Management (shareholder of China Baoli) and Winston XI were mentione among the shareholders of Yota Devices instead of Rostec with a share of 25.1%.

At the same time, China Baoli announced its intention to buy this package for $60 million and ambitious plans for the development of YotaPhone: in particular, the company expected, becoming the controlling shareholder of the manufacturer, to start supplying the smartphone to customers of the State Information Agency of China “Xinhua”.

Sales of the third-generation device were launched in China in October 2017. As of March 31, 2018, its sales revenue amounted to HK $ 41 million (about USD $5.2 million), and the loss — HK$118.6 million (USD $15.1 million).

Yota Devices still has Russian shareholders – Telconet Capital Ltd Fund of Sergey Adonyev and Albert Avdolyan with a share of 34.9%.

CEO of Yota Devices in Russia Ruslan Karabugati announced that the cancellation of transaction — the question of the company’s shareholders and it will not affect the strategy and activities of Yota Devices.

Acquisition of control over Yota Devices is interpreted by the exchange as a significant change in the business structure of China Baoli, because the capitalization of China Baoli is $258 million, and Yota Devices about $150 million where major role is playing comparability of companies sizes. In addition, after the closing of the transaction, China Baoli’s revenues from mobile technologies would have grown to 90%, which the exchange also considers as a significant change. More chances to approve the deal would be if Yota Devices was a public company or was much smaller in size.

Such cancellations occur on the Hong Kong stock exchange: for example, in 2015, for similar reasons, the transaction was canceled for the acquisition by Hoifu Energy of assets of Madagascar Natural Gas Group Ltd.

Until mid-2017, the main business of the China Baoli group was associated with sea cruises, whereas after transaction with Yota Devices it would be mobile devices industry. The exchange saw this as a “reverse takeover”, that is, the acquisition of assets by a company that has already passed the listing procedure, with the possible goal of de facto listing of the acquired company, bypassing the conditions established by the exchange.

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