The Shanghai International Port Group acquisition will raise China Merchants' per-share earnings by 12 percent and return on equity from 15.3 to 17 percent, China Merchants deputy general manager Cynthia Wong said.

Total throughput of the company will be bolstered fivefold to 150 million twenty-foot equivalent units (TEUs) by 2010 from 30-35 million TEUs in 2004.

China Merchants said in December it planned to pay about 5.6 billion yuan (HK$5.28 billion) for a 30 per cent stake in Shanghai's dominant port operator, to become its second-largest shareholder.

Wong said China Merchants will maintain at least a 20 percent stake in the Shanghai International Port Group after the share float, adding it does not have other strategic partners.

The Financial Times reported earlier that the Shanghai container terminal operator, which posted a year-on-year 53 percent increase in net profit to 930 million yuan in 2003, planned to raise as much as US$800 million (HK$6.24 billion) via a listing in Hong Kong for the expansion in Yangshan port.

The first phase of Yangshan port, the mainland's biggest port investment project with a total investment of 100 billion yuan and 26 percent owned by China Merchants, will be completed this year.

Wong said the project is expected to become profitable in three years, compared to five years for other port projects.

Apart from Shanghai, China Merchants is also planning to expand to other regions, including Dalian and Nanning, to compete with its Hong Kong-listed peer, Cosco Pacific.

Wong said the company is also interested in expanding its investment in Tianjin. China Merchants has a 14 percent stake in Tianjin Wuzhou International Container Terminal but has no presence in Dalian and Nanning.

Cosco Pacific has already taken stakes in Dalian ports and automobile terminal.

Shares of state-backed China Merchants gained about 9 percent after it revealed plans to buy a 30 percent stake of the Shanghai port for 5.25 billion yuan in December.

The stock rose to its highest since 1997 to close at HK$15.35 on Monday.gladys.tang@globalchina.com