(Yicai Global) Dec. 30 -- BOE Technology Group will pay CNY6.9 billion (USD991.7 million) to substantially increase its holdings in an affiliate that is currently owned by the Hefei municipal government and which forms an important part of the Chinese display panel titan’s large-size liquid crystal display panel production.

BOE will purchase a 28.3 percent stake in Hefei BOE Display Technology, a company that it designed and built, from Hefei Xinping Industry Investment Fund under the capital city of eastern Anhui province’s State-owned Assets Supervision and Administration Commission, it said yesterday

After the transaction, BOE’s holdings will surge to 36.67 percent from 8.33 percent, while the Xinping Investment Fund’s equity will be diluted to 63.33 percent.

“BOE is acting as planned and is slowly buying back the stake held by the fund manager under the local government,” said Rong Chaoping, senior researcher at market research firm AVC Rev. A considerable part of the capital needed to build these factories comes from local government funds. As part of the agreement, the state will gradually exit the entities once they are running smoothly.

The increased shareholdings will enable BOE Display to be managed more efficiently, Beijing-based BOE said.

BOE Display boasts the world’s first-ever production line for Gen 10.5 LCD panels. However, it logged losses of CNY2.7 billion (USD388.1 million) in the first nine months on revenue of CNY8.7 billion (USD1.2 billion), according to recent data.

BOE plans to hike output of large-size display panels next year, market research firm Sigmaintell said in its latest research report. The firm is likely to substantially boost production capacity of Gen 10.5 panels as well as 65- and 75-inch displays.

Back in July, BOE said it planned to pay CNY7.28 billion for a 28.33 percent stake in BOE Display. It would appear that the display panel giant has managed to negotiate a discount of CNY349 million (USD50.2 million) since then.

BOE’s share price [SHE:000725] was trading flat at CNY3.36 (USD0.48) as of 12.30 p.m. China time today.

Editors: Liao Shumin, Kim Taylor