China International Marine Containers (Group) Co has agreed to buy a 29.9 percent stake in Singapore-based Yantai Raffles Shipyard Ltd for US$566 million.
CIMC, the world's largest shipping-container maker, said yesterday the purchase of 81.8 million shares would allow it to enter the special marine-construction and ocean-engineering sectors. Yantai Raffles specializes in the construction of marine and offshore projects, such as jack-up drilling rigs and platform-supply vessels, with its main operations at Yantai, in Shandong Province.
CIMC will pay 38 Norwegian kroners (US$7.40) per share for the stake, representing a substantial premium to the last quoted price of 18 kroners on the Oslo over-the-counter market before the announcement. CIMC said the premium was set on the back of a positive industry outlook and the orders that Yantai Raffles had secured.
Yantai Raffles, which had a net profit of about 100 million yuan (US$14.1 million) in 2006, is expected to post earnings of 140 million yuan in 2007 and 300 million yuan this year, according to a SYWG Research & Consulting report.
This will help add 0.04 yuan to 0.05 yuan to CIMC's earnings per share, or boost earnings by up to four percent in 2008, SYWG analyst Hu Limei wrote in the report.
"The strategic significance of the deal would be much larger than the earnings growth it would contribute," Hu said. "The purchase would allow CIMC to set up a base in the vast offshore-engineering sector in a short time and to compete with major rivals in that industry."
A China International Capital Corp report said CIMC may seek stock financing to help fund the acquisition.
CIMC shares fell 5.3 percent to 20.35 yuan yesterday in Shenzhen trading.
(Shanghai Daily March 14, 2008)
