Merger deal could be off
By Chen Xiaomin
"A sound performance appraisal system is essential for healthy growth of CITS's tourist business in the future."
Two participants in the International Toursim Fair in Shanghai walk past CITS display. Photo: IC
The securities regulator has approved China International Travel Service's (CITS) IPO application, boosting the country's top tourist agency's businesses but leaving the future of its merger with OCT Enterprises uncertain.
CITS said Tuesday in a prospectus posted with the Shanghai Stock Exchange that book building would last from today till Friday, and subscription would be open September 22 to 23.
Nearly 220 million A-shares denominated in yuan, or up to 25 percent of its expanded capital after the IPO, will be issued and 1.7 billion yuan ($249 million) or more is expected to be raised. China Securities is underwriting the deal.
The offering, the largest IPO in China's tourist industry, will be the fifth largest of nearly 30 IPOs after Sichuan Chengyu Highway, China State Construction Engineering Corporation, Everbright Securities and China Metallurgical Group Corporation since securities regulator reopened the door in June.
The Beijing-based CITS said the A-share issue proceeds would be used for expansion of its core businesses – tourist agencies and duty-free shops.
It plans to invest 906.12 million yuan ($132.69 million) in its tourist business, opening new tourist agencies at home and abroad and developing its e-commerce. Almost 800 million yuan ($117.15 million) will go to upgrading service facilities and opening more duty free shops.
Sinolink Securities' tourism analyst Mao Zhengrong sounded a similar note, adding there are clearer benefits for CITS-run duty-free shops than the company's tourist agencies.
China Duty Free Group under CITS, which ranks in the top 20 in world duty-free sales, has more than 150 duty free shops in over 90 cities and regions all over China, including airports, railway stations, border crossings, ocean shipping supply centers, and ferry terminals.
"A sound performance appraisal system is essential for healthy growth of CITS's tourist business in the future," Mao told the Global Times.
Mao added the opaque system was the immediate cause of high personnel turnover rates in the industry, citing an example of China CITS Tours Holding, whose staff in the inbound department were lured away by other tourism agencies in the early 2000s.
Mao also said the offering would make the future of a merger between CITS and OCT Enterprises, who have been in talks for more than a year, unclear.
The two companies signed a strategic cooperative agreement last February planning to cooperate in areas of business, brand, management and manpower, establishment of industry standards, and capital.
CITS raked in 333 million yuan ($48.77 million) in net profits in 2008, up 24.72 percent from a year earlier, and 224 million yuan ($32.82 million) in the first half of 2009.
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