Tianjin in Talks to Sell State-Owned Unit Stakes to TCL

(Bloomberg) -- The government of Tianjin is in early talks to sell stakes in two of its listed technology firms to Chinese consumer electronics giant TCL Corp., according to people familiar with the matter.

The discussions involved holdings in chip devices maker Tianjin Zhonghuan Semiconductor Co., and Tianjin Printronics Circuit Corp., a printed circuit boards producer, the people said. Tianjin’s government and TCL are still exploring options including direct stake sales or having the electronics company acquire control in the major shareholder of the two listed firms, said the people, who asked not to be identified as the discussions are private.

TCL has been shifting its focus to technology and hence has been studying the industry including the relevant companies, it said in an exchange filing on Sunday. The firm hasn’t reached any concrete agreement and will make an announcement on any progress, it said.

Tianjin Printronics shares rose as much as 4.1% on Monday before falling 1% as of 10:18 a.m. in Shenzhen. Tianjin Zhonghuan climbed as much as 5%, giving it a market value of 41.3 billion yuan ($6 billion).

Tianjin in Talks to Sell State-Owned Unit Stakes to TCL

Tianjin, a port city near Beijing, has one of the highest ratios of debt through local government financing vehicles to GDP in China and has seen rating downgrades among several government-related entities. Tewoo Group Co., a major commodities trader based in Tianjin, recently became the biggest dollar bond defaulter among China’s state-owned companies in two decades.

TCL has been a strong backer of Tianjin’s efforts to restructure its debt and introduce private investment in state-owned companies. The Huizhou-based company in 2015 invested in Tianjin 712 Communication and Broadcasting Co., a communication equipment maker. TCL is the second largest shareholder with a 19% stake in the firm, according to data compiled by Bloomberg.

In November, TCL signed a strategic cooperation deal with the Tianjin government that involves investments in industries from semiconductor to artificial intelligence, according to an announcement at that time. TCL also led the setup of a 10 billion yuan fund that supports high-tech startups in the city.

Tianjin Zhonghuan Electronic and Information Group Co., which is directly under Tianjin’s State-owned Assets Supervision and Administration Commission, holds a 28% and a 25% stake in Zhonghuan and Printronics respectively, according to data compiled by Bloomberg.

Deliberations are at preliminary stage and may not lead to a transaction, said the people, who asked not to be identified as the information is private. A representative for Tianjin government didn’t respond to requests for a comment last week, while representatives for Tianjin Zhonghuan and Tianjin Printronics said they have no information on the matter.

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