CIMC set to purchase YRSL stake
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China International Marine Containers (Group) Ltd (CIMC) will spend US$1.7 billion to buy stakes of Yantai Raffles Shipyard Ltd (YRSL) to strengthen the group's marine engineering business, company executives announced yesterday.
The container provider is expected to get controlling rights for the biggest production base of drilling platforms in China through the unconditional voluntary cash tender offer.
Bright Day Ltd, a wholly owned subsidiary of CIMC Hong Kong, will buy up to 44.79 percent of YRSL's floated shares at a price of US$1.41 per share. CIMC Hong Kong and its wholly owned subsidiary, Sharp Vision Holdings Ltd, hold 18.3 percent of YRSL shares.
According to the deal, if CIMC Group purchases of YRSL shares were less than 50 percent, one of the bigger shareholders would sell an 8.5 percent stake to CIMC Hong Kong.
At present BT Entities (Leung Kee Holdings Ltd and Bright Touch Investments Ltd) holds 36.91 percent of YRSL's listed shares while DnB NOR Bank ASA holds 37 percent, and Platinum Nominee Ltd 7.4 percent.
CIMC said the stake buy would increase the company's investment and capital in marine engineering, a sector it entered in 2008. The stake buy would also help make YRSL's strategic development goals more consistent with the group's operational plans.
"Taking into consideration the development of the global marine engineering sector, particularly in China, and the subsequent demand growth for relevant equipment, we expect the deal to bolster profits in the long run," the company said in its disclosure statement. CIMC also expects to cash in on the excellent resources of YRSL.
During the third quarter of this year, CIMC reported a loss of around 50 million yuan, with total net profit in three quarters falling nearly 50 percent year-on-year to 776 million yuan.
"The company has always been seeking chances to shift its focus from container manufacturing to industries with higher added value like energy equipment. The deal looks good at current prices, as the shipbuilding industry has been languishing due to the economic crisis," said Guo Yaling, an analyst with CITIC Securities.
Guo said CIMC's cost control advantage largely due to its long experience in managing the low-profit container industry, would suit YRSL, a company of excellent products but with higher costs.
Founded in Singapore in 1994 and based in Shandong province, YRSL went public in May 2006 at the Norwegian over-the-counter market, floating 273 million ordinary shares. It is experienced in building ships for the offshore crude oil and natural gas market, including self-elevating drilling platforms, semi-submersible platforms, floating production, storage and offloading vessels, floating cranes, pipe laying vessels and so on.
For the period ending June 30 this year, YRSL reported revenue of SUS$440 million and nearly SUS$23.6 million as net profit.
CIMC is the biggest container provider in China, with businesses extending to the manufacturing of trailers, tank equipment and airport equipment.
The company had 47.327 billion yuan sales and 1.407 billion yuan net profit in 2008. It has 100 subsidiaries and 47,000 employees in China, North America, Europe, Asia and Australia.
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