Ark Royal sale in Varyag shadow:

HONG KONG - Like a boy in a bath tub, China is again making a splash in it's desire to play with big - and potentially dangerous - boats, this time with bids by its citizens for the retired British Royal Navy aircraft carrier the Ark Royal.

The bids include one by an outfit part-owned by a jailed retail tycoon, Huang Guangyu. The alleged aim is to operate the stripped vessel as a floating exhibition platform.

Huang, 42, known in Cantonese as Wong Kwong-yu, was once the Chinese mainland's richest man, through his Hong Kong-listed Gome Electrical Appliances Holdings. He is now serving a 14-year prison sentence on the mainland after being convicted of bribery, insider trading and illegal business dealings in May last year after being arrested by Beijing police in late 2008.

Zhao Qiguang, project manager of Eagle Vantage Asset Management Co, which made the bid, said the purchase would be aimed at broadening the business development of Eagle Vantage. "If it succeeds, the company will convert the Ark Royal into the world's largest floating exhibition platform for high-end appliances and luxury products … Other companies are welcome to use the platform," he said.

Perhaps so. Yet skeptics will point to the one-time half-built Soviet aircraft carrier the Varyag, which a businessman in Macau, who had a background in the People's Liberation Army, bought in 1998 for US$20 million from Ukraine after the collapse of the Soviet Union. The announced intention was to convert it into a floating casino.

In early 2002, Beijing moved the carrier to Dalian, in northeastern Liaoning province, for renovations. This week, Chen Bingde, chief of General Staff of the People's Liberation Army, confirmed for the first time in public that reconstruction of the Varyag, now dubbed China's first aircraft carrier, is almost complete, and the ship is to make its maiden launch in a few weeks.

Two other Soviet-era carriers are also in China. The Kiev, docked in Tianjin, south of Beijing, and the Minsk, docked in Shenzhen, near Hong Kong, have been transformed into floating military-theme parks.

Zhao said the Ark Royal bid was made by the company at "the administrative level" and had nothing to do with Huang. "Huang is a large Eagle Vantage shareholder, but he doesn't participate in the company's operations," he said. Hong Kong-based Eagle Vantage is involved in sales of home appliances, real estate investment and club operations in Hong Kong and China.

Zhao refused to disclose the bidding price. The company would tow the warship to Hong Kong or Macau before refitting it with hi-tech products and transforming it into a showcase for high-end customers, the South China Morning Post reported.

Even so, the People's Liberation Army would launch a thorough examination of the warship if the bid proved successful, said military analyst Anthony Wong Dong, president of the International Military Association in Macau. He said the carrier was of little military value, given its relatively small size of about 22,000 tonnes.

The tender for the Ark Royal closed on July 6, according to the website of Disposal Services Agency, an online auction platform under the UK's Ministry of Defence. The disposal services authority will strip the Ark Royal of her weapons, communications systems and other advanced military equipment before handing her over to the eventual buyer, according to its website.

The 210-meter vessel is the fifth to have carried the name Ark Royal, the first finding fame in 1588 when England, under Queen Elizabeth I, fended off the invasion attempts of the Spanish Armada. The third vessel to operate under the name was famously involved in the 1941 sinking of the German battleship the Bismarck before it was itself sunk in the same year by a German U-boat.

The latest Ark Royal, which was in service for 25 years, played a leading role in supporting the invasion of Iraq. She is among a number of vessels put up for auction by the UK Ministry of Defence this year, including her sister carrier, the Invincible, which was sold for scrap in February, according to the Financial Times.

Eagle Vantage is not the only Chinese bid for the carrier, with Chinese businessman Lam Kin-bong, who runs a restaurant chain in Birmingham, England, making his second attempt to own one. In February, Britain rejected a 5 million pounds (US$8 million) bid for the Invincible from Lam after he had "failed to provide all the necessary information".

Lam's offer was more than double the price a Turkish ship recycling factory, which won the bid at an estimated price of 2 million pounds. The 17,000-tonne aircraft carrier, sold by the Disposal Services Agency, was decommissioned in 2005 and stripped of engines and weapons.

"With the previous experience, the possibility for me to win is higher this time," said Lam, who hoped to turn the aircraft carrier into an international school to help foster communication and cultural ties between China and Britain.

He said his move had nothing to do with the military and if permission to tow the vessel to China was withheld, he would dock it in Liverpool.

A third Chinese bidder for the Ark Royal is Philip Li Koi-hop, chairman of the Hong Kong Ship Art Club, who went to Britain in early May to visit the vessel and filed the bid. In 2002, Li failed in a bid to buy an aircraft carrier from Russia.

Li said the club has around HK$800 million (US$103 million) to fund the project. Around HK$250 million will go to bidding for the carrier and the rest will go to turning the ship into an exclusive yacht club, which could serve as a base for the club's 200 members, who pay US$10,000 each to join. Li also has plans for a more public role for the ship as an international marine and ocean research center, a youth training center can be built inside.

It is possible all three bids will stumble in the face of politics, at least according to Lu Renbo, deputy secretary-general of the China Electronic Chamber of Commerce. "The Ark Royal was once a flagship vessel of the British Royal Navy, and a possible overseas deal could spark concerns in Britain about China's army ability," he said.

A Gome spokeswoman said Gome was not involved in the auction for the Ark Royal and the Eagle Vantage bid nothing to do with Huang. Eagle Vantage is not a subsidiary of the Hong Kong-listed Gome, she said.

Experts on the mainland electronic appliance industry, however, believed Huang was behind the bid. Liu Buchen, an expert on the mainland home appliance industry, said that if it was successful, "Huang and his companies could explore new business modes to increase their market share. If it fails, the move has shown the world Huang and his companies have the strength and resources to get the eyeballs while they face competition."

Huang, ranked China's richest man for the first time in 2004 with US$1.3 billion, made his fortune by building Gome into one of the country's major consumer electronics retailers. By 2009, after his arrest and a slide in share values as the global financial crisis took hold, he was worth $3.4 billion.

In March last year, Gome announced that Chen Xiao, who replaced Huang as the chairman after Huang's arrest, had himself resigned and been replaced by Wang Dazhong, a friend of Huang.

Gome posted a net profit of 552 million yuan (US$85 million) for the first quarter, compared with 333 million yuan a year earlier, while revenue rose 16% year on year to 13.6 billion yuan.

Gome has 856 shops under the company's management at the end of March. More than 400 other Gome stores are controlled by Huang. It is not clear whether electric-powered battleship toys are among the goods for sale.

Source: Asia Times. Olivia Chung. 15 July 2011

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