Cosco Shipping Sells Port Assets In China’s Yangtze River

FILE PHOTO: A Cosco Shipping vessel is moored at PSA's Pasir Panjang container terminal in Singapore September 19, 2018.  REUTERS/Edgar Su/File Photo

On 18 September 2019, the Company (as seller) entered into the Longtan Share Purchase Agreement, Yuanyang Share Purchase Agreement and Zhangjiagang Share Purchase Agreement with SIPG (HK) (as purchaser), in relation to the sale and purchase of the Company’s indirect interests in Nanjing Longtan Terminal (via Longtan SPV), Yangzhou Yuanyang Terminal (via Yuanyang SPV and Zhangjiagang SPV) and Zhangjiagang Terminal (via Zhangjiagang SPV), respectively.

After completion of the Share Purchase Agreements, the Company will cease to own any interest in any of the Target Companies, Nanjing Longtan Terminal, Yangzhou Yuanyang Terminal and Zhangjiagang Terminal. Each of Longtan SPV, Yuanyang SPV, Zhangjiagang SPV, Yangzhou Yuanyang Terminal and Zhangjiagang Terminal will cease to be a subsidiary of the Company following the completion of the Transactions, and Nanjing Longtan Terminal will cease to be an associate of the Company following the completion of the Transactions.

POSSIBLE DISPOSAL OF INTERESTS IN TAICANG TERMINAL AND JIANGSU PETROCHEMICAL TERMINAL

In addition to the Transactions set out above, the Board would like to further announce that the Company also intends to dispose all of the Company’s indirect interests in Taicang Terminal and Jiangsu Petrochemical Terminal. As at the date of this announcement, no agreement has been entered into by the Group in relation to such disposals.

There is no assurance that the Possible Transactions will take place or as to when they may take place. Shareholders and potential investors of the Company should therefore exercise caution when dealing in the securities of the Company.

REASONS FOR AND BENEFITS OF THE TRANSACTIONS

The Transactions are in line with the Company’s strategic plan to divest assets in order to achieve capital recycling, which will add momentum for the future development. The Company aims to improve asset quality, optimize domestic terminal portfolio and improve operating efficiency of the Company. Disposal of interest in various port assets, the throughput and profit contribution from which is relatively small, will further streamline our terminal portfolio and enhance our profitability.

The Company is committed to building global terminal network with controlling stakes and strengthening control and management of the ports and terminals business. The Company believes that the Transactions could improve the overall quality of the Company’s terminal portfolio in the Yangtze Delta Region.

The Directors consider that the terms of the Transactions are fair and reasonable and are in the interests of the Group and the Shareholders as a whole.

INFORMATION ABOUT THE GROUP

The Group is principally engaged in the businesses of managing and operating terminals, and related businesses.

INFORMATION ABOUT THE PURCHASER

The Purchaser is principally engaged in businesses of international freight forwarding, shipping agency, container leasing, port stevedoring, warehousing, road cargo transportation, and import and export of goods and technologies.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, the Purchaser and its ultimate beneficial owner are Independent Third Parties.

FINANCIAL EFFECTS OF THE TRANSACTIONS

After completion of the Share Purchase Agreements, the Company will cease to own any interest in any of the Target Companies, Nanjing Longtan Terminal, Yangzhou Yuanyang Terminal and Zhangjiagang Terminal. Each of Longtan SPV, Yuanyang SPV, Zhangjiagang SPV, Yangzhou Yuanyang Terminal and Zhangjiagang Terminal will cease to be a subsidiary of the Company following the completion of the Transactions, and Nanjing Longtan Terminal will cease to be an associate of the Company following the completion of the Transactions.

The Group is expected to record a net gain (after deducting the relevant taxes and expenses) from the Transactions of approximately US$75,900,000 (equivalent to approximately HK$595,549,000) in its consolidated statement of profit or loss for the year ending 31 December 2019. This amount is calculated based on the consideration less Target Companies’ unaudited net asset values included in the Company’s consolidated financial statement as at 30 June 2019. Such income is expected to be recognized in the Company’s consolidated financial statements for the year ending 31 December 2019. Due to the possible fluctuations in the foreign exchange rate, there may be differences in the net asset values of Target Companies as well as the relevant taxes and expenses of the Transactions between 30 June 2019 and the actual closing date. As a result, the Company’s actual net gain from the Transactions may be different from the estimated amount set out above.

USE OF PROCEEDS

The Company plans to use the proceeds from the Transactions for the following purposes: (1) future development of the Group; (2) general working capital; and (3) repayment of loans.

Background information on Taicang Terminal and Jiangsu Petrochemical Terminal is set out below.

Taicang Terminal

Taicang Terminal is a company incorporated in the PRC. As at the date of this announcement, the Company is indirectly interested in 39.04% of the total issued share capital of Taicang Terminal through CSPI, a wholly-owned subsidiary of the Company. It is principally engaged in the operation of container terminals.

Jiangsu Petrochemical Terminal

Jiangsu Petrochemical Terminal is a company incorporated in the PRC. As at the date of this announcement, the Company is indirectly interested in 30.40% of the total issued share capital of Jiangsu Petrochemical Terminal through CSPD, a wholly-owned subsidiary of the Company. It is principally engaged in the operation of bulk liquid storage.

There is no assurance that the Possible Transactions will take place or as to when they may take place. Shareholders and potential investors of the Company should therefore exercise caution when dealing in the securities of the Company.

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