Caixin
Apr 08, 2019 08:08 PM
BUSINESS & TECH

Under Pressure From Beijing, Prestigious University Cuts Stake in Another Firm

Tsinghua Tongfang employees manufacture LCD TVs in Shenyang, Liaoning province in October 2013. Photo: VCG
Tsinghua Tongfang employees manufacture LCD TVs in Shenyang, Liaoning province in October 2013. Photo: VCG

A company established by the prestigious Tsinghua University plans to divest most of its stake in a domestic tech firm to meet Beijing’s call to downsize their company stakes.

The deal is just the latest move by Tsinghua’s very profitable holding company to unload some of its assets since the central government began last year pushing Chinese universities to focus more on education and less on business.

Tsinghua Holdings Co. Ltd. plans to sell 21% of its 25.75% stake in Tsinghua Tongfang Co. Ltd., an information and energy-conservation technology company, to an investment unit of China National Nuclear Corp., in a deal valued at 7 billion yuan ($1.04 billion), the Shanghai-listed Tongfang said in a statement last week.

After the deal, Tsinghua Holdings will retain 7.1% of Tsinghua Tongfang, which includes a 2.35% stake held by one of its subsidiaries. The deal is still pending approval from authorities such as the State-owned Assets Supervision and Administration Commission.

Tsinghua Holdings, which was set up by Tsinghua University in 2003, owns dozens of companies operating in industries that include integrated circuits, energy, environmental protection, health care and online education. As of the end of 2017, the company had 431.9 billion yuan in assets, representing an annual increase of 22.4%, according to the Shanghai Clearing House. Its profit grew more than 1.5 times that year to 6.3 billion yuan, with revenue up by 26% to 120.7 billion yuan.

The purpose of the deal is “to implement Beijing’s reform on colleges’ commercial assets, and to improve Tongfang’s growth and competitiveness by inviting investors that can serve Tongfang’s long-term strategic development goals,” according to a separate statement (link in Chinese) from Tsinghua Holdings.

This was followed by a similar pact in August, when Tsinghua Holdings said it would unload part of its 51% stake in Tsinghua Unigroup Co. Ltd., which produces smartphone chips and provides cloud services.

In May, Beijing rolled out guidelines to reform enterprises under colleges and universities, which were told to “follow the path of state capital management reform” and “focus on education.”

After China’s ruling Communist Party sent anti-graft inspectors last year to centrally administrated universities like Tsinghua, the school vowed to restructure its businesses and downsize indirectly owned equities.

Founded in 1997, Tongfang offers products and services used in areas such as public safety, industrial production and energy conservation. For the first three quarters of 2018, the company reported a net loss of 572 million yuan on revenue of 16.6 billion yuan.

Contact reporter Mo Yelin (yelinmo@caixin.com)

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