PRAGUE, March 12 (Reuters) - Czech-Slovak financial firm J&T Finance Group said on Monday it would not be able to conclude a deal giving Chinese conglomerate CEFC a bigger stake in its business if the Chinese company could not explain media reports about its economic problems.
CEFC China Energy has been on an acquisition spree in the Czech Republic and central Europe in recent years, buying a 9.9 percent stake in J&T Finance Group and agreeing to raise that to 50 percent for hundreds of millions of euros, pending regulatory approvals.
But CEFC has come under pressure amid reports its chairman had been investigated for alleged economic crimes and that the group has had to scramble to secure short-term funding, according to people with knowledge of the matter.
J&T said on Monday it was seeking an official statement from CEFC’s highest officials on media reports on its finances in recent weeks.
“If CEFC does not disprove satisfactorily news of major economic problems of the group and clearly explain the reasons of the alleged prosecution of its senior official, the completion of the long-prepared transaction for entry to J&T Finance Group is unacceptable,” J&T said in a statement.
Reuters, Chinese and international media reported this month on investigations into CEFC’s chairman Ye Jianming. CEFC has denied this and said operations were normal.
On Friday, CEFC’s Prague-based unit CEFC Group (Europe) said it had raised its capital by 13.5 billion crowns ($653 million) and that this was “a signal that the company is a stable and credible partner.”
On Monday, Reuters reported CEFC China Energy was prepared to pay annual rates of as much as 36 percent for short-term funding in a sign of the cash crunch faced by the company.
CEFC has also invested in Czech brewery group Lobkowicz, Prague soccer club Slavia Praha and hotels and real estate. It owns 49.9 percent of airline firm Travel Service, which controls national carrier Czech Airlines.
$1 = 20.6770 Czech crowns Reporting by Jason Hovet; editing by Jason Neely and Jane Merriman