By staff reporter Xu Ke and intern reporter Wang Weixiong

From Caijing Online

Gome Electrical Appliances, China's largest home appliance retailer, is on the hunt for investors, having hired Cazenove Asia to advise on a possible new share offer. 

Gome, whose former chairman is under investigation for economic crimes, is looking into privately issuing new shares worth 20 percent of its current market value to institutional investors. The company asked interested parties to submit their proposals before by January 26, right before China’s weeklong Spring Festival began.

Caijing learned that Bain Capital and the Carlyle Group have made offers to Gome. A number of private equity funds have also reportedly approached Gome in recent months.

Bogged Down in Uncertainty

Many observers have speculated that Gome is hurting for credit after its founder and former chairman, Huang Guangyu, was arrested late last year for alleged illegal trading. Certainly, the company is facing pressure from a daunting HK$ 4.6 billion of convertible bonds that it will have to repay as early as May 2010.

Gome made initial moves toward new investors early this year, but a lack of financial information about the company has so far prevented any concrete deals from forming. An involved source told Caijing that “the seller and its adviser have provided nothing except for the public information.”

A source from a private equity fund that gave up on a deal with Gome had a similar complaint. "Since the information was absent and progress was slow, we decided to withdraw," said the source.

A report from Ernst & Young on Gome's financial health in the wake of Huang’s detention is expected in the next few weeks, which should clarify the state of Gome’s assets.

But a dearth of financial data is not the only issue keeping investors wary. An industry insider said there are still huge question marks hanging over Huang’s case, which could affect the company’s operations.

Any new share issuance needs approval from Gome’s board. With Huang and his wife still in control of 35.55 percent of the company, their decision could be decisive at a time when it’s unclear how or if they will give it.

The price of Gome’s new shares and the state of China's appliance market are also concerns.

Since the beginning of 2008, Gome's share price has declined about 80 percent. When trading was suspended on November 24 in connection to Huang’s arrest, the company's market value stood at HK$ 14.3 billion.

Industry experts say that the company's share price is likely to continue to drop after trading resumes, and that it’s fundraising efforts will only generate several billion yuan.

Chinese article: http://www.caijing.com.cn/2009-02-11/110055200.html