Shenghe Resources proposes RMB1.81B sale of rare-earth processing stakes

Shenghe Resources Holding Co., Ltd. SHA600392, listed on the Shanghai Stock Exchange, proposed selling 51 per cent stakes in four rare-earth processing businesses for an estimated RMB1.6575 billion to RMB1.8105 billion, pending final valuation. The businesses generated 36.57 per cent of its first-half net profit before intercompany eliminations.

Shenghe's Oct. 19 announcement estimates consideration at RMB1.6575 billion to RMB1.8105 billion, with the final price still subject to valuation. The buyer is China Rare Earth Group Industry Development, identified in the notice as wholly owned by China Rare Earth Group.

The board approved the proposal on Oct. 17, but shareholders must still consider it. The payment schedule also requires a decision on a merger-control filing among the obligations to be completed before the second instalment.

Shenghe would lose control of the four businesses and stop consolidating their financial results after completion. The proposed consideration would arrive in five instalments, with later payments tied to audited performance and any required compensation.

Shenghe Would Retain Minority Interests

Shenghe describes itself on its corporate website as a producer and supplier of rare earths and related products. The disposal concerns smelting and separation businesses, including Leshan Shenghe, Quannan New Resources, Jiangyin Jiahua and Zibo Jiahua.

Before the Leshan disposal, its holdings in subsidiaries and other companies would be transferred to Shenghe or other wholly owned subsidiaries. That restructuring would separate those investments from the smelting and separation business being sold.

The ownership tables in the issuer's transaction announcement show Shenghe retaining 49 per cent of Leshan Shenghe. Its subsidiary Ganzhou Chenguang Rare Earth New Materials would retain 48 per cent of Quannan New Resources and 35 per cent of Jiangyin Jiahua.

For January through June 2026, the four businesses reported combined revenue of RMB1.76 billion and net profit of RMB332.1 million. Their combined revenue represented 20.09 per cent of Shenghe's consolidated revenue before intercompany eliminations.

Those figures do not measure the earnings Shenghe would lose after the disposal. The company says its accounting for the businesses would change from consolidation to the equity method, reflecting the minority investments it would retain.

The notice also warns of possible future raw-material supply risks for downstream operations. During the first half of 2026, the businesses' sales within the group represented less than 10 per cent of the downstream businesses' raw-material purchases.

Payments Depend On Closing And Performance

The Oct. 19 payment schedule allocates 10 per cent of consideration to the first instalment and 40 per cent to the second, each subject to conditions. The remaining payments depend on completion and subsequent annual performance checks.

The third instalment represents 10 per cent and requires the first annual audit during the performance-commitment period, alongside satisfaction of the performance commitment or compensation. The fourth and fifth instalments are each 20 per cent and depend on the corresponding annual checks.

"The assessed values and performance commitments for this equity cooperation have not yet been fixed at specific amounts," Shenghe said in the Oct. 19 notice, translated from Chinese.

The preliminary valuation uses June 30, 2026 as its reference date and values all equity in the four businesses at RMB3.25 billion to RMB3.55 billion. The proposed sale price represents the controlling stakes rather than full ownership.

The next pricing step is a supplemental agreement confirming final consideration. The Oct. 19 notice requires it within 15 business days after the valuation report is issued and filed with the authorised state-asset oversight body, unless the parties agree another timetable.