COSCO Singapore to acquire stakes in two Asia logistics firms worth $369m

11/13/2017

Singapore-listed COSCO Shipping International (Singapore) is looking to purchase shares of a local logistics company as well as an Indonesia-based affiliate to expand its logistics business network in Southeast Asia following the disposal of its shipyard division.

In the first deal, the company will pay up to S$488.1m ($358.4m) for the entire stake in Singapore-based Cogent Holdings of 478.5m shares at S$1.02 apiece, factoring in historical and prevailing market prices of CHL’s shares, its historical financial position and performance, as well as the premium to purchase statutory control of the company.

COSCO Singapore will be financing the transaction via its own cash as well as a bank loan and has already inked a deal for a loan facility of up to S$350m from Bank of China, its financial adviser for the offer. The bank has verified the company has enough resources to fund the acquisition.

As of Thursday, COSCO Singapore had received acceptances from the three key shareholders who are also directors of CHL and hold a combined 84.33% stake, or about 403.5m shares. After the sale they plan to step down from their positions.

Chief Executive Benson Tan will be retained to ensure business continuity for a period of three years.

COSCO said CHL’s businesses would continue as normal with no major changes, adding that did not intend to redeploy any major fixed assets or make any staff cuts.

COSCO Singapore said that the acquisition would complement parent China COSCO Shipping Corporation’s logistics business network across China and when completed, it will tap China COSCO’s current platform to find new business in Southeast Asia as China’s One Belt, One Road infrastructure initiative develops.

“The company will be able to offer end-to-end services to its customers with logistical needs in Singapore and Malaysia, thereby increasing the company’s competitive edge in relation to its global competitors and entrenching its customers.”

CHL is a logistics firm with businesses in transportation, warehousing, container depots, automotive, project cargo and property management.

In the second deal, COSCO Singapore will purchase a 40% stake in Ocean Global Shipping from a unit of parent China COSCO Shipping Corporation for about S$13.9m ($10.2m).

The unit, COSCO Shipping (Southeast Asia) currently holds a 49% stake in Ocean Global Shipping, with the remaining 51% held by Global Putra Indonesia Maritime.

COSCO Singapore intends to uses its own cash resources to complete the purchase by December 31, 2018.

Ocean Global Shipping is an Indonesia-incorporated firm that provides logistics services, container canvassing and management, ship agency and chartering and bunkering. It also owns Global Terminal Marunda on the edge of Jakarta, which is involved in container storage and maintenance services.

“The company has previously announced, in connection with the disposal of its shipyard business, that it is actively reviewing potential investment opportunities. The company believes that the proposed acquisition will allow the company to own a stake in a profitable business which is complementary to the continuing business of the company and which will also provide the company an opportunity to develop further in the logistics sector in Southeast Asia,” it said in a statement.

In May this year, the company inked a sale and purchase deal with COSCO Shipping Heavy Industry to dispose of its 51% stake in COSCO Shipyard Group, its 50% stake in COSCO (Nantong) Shipyard and a 39.1% stake in COSCO (Dalian) Shipyard for a total consideration of Yuan1.5bn ($212.4m).

For the third quarter of the year, the company reported a S$19.4m ($14.2m) net profit compared with a massive S$254.1m loss in the year ago period which was mainly due to the sale of its shipyard operations. Revenue for the period fell 29% year-on-year to S$7m.

COSCO Singapore’s deals come after another Chinese conglomerate, HNA Holding Group, though its unit HNA Belt and Road Investments, made a formal offer for Singapore-based logistics firm CWT for about S$1.4bn ($1.0bn).

Thar deal is part of HNA Group’s strategy to seek out global merger and acquisition opportunities in sectors such as logistics real estate, logistics warehousing, bulk commodity trading, logistics finance and logistics transport facilities related to One Belt, One Road.

In 1970, CWT was established as a private arm of PSA handling warehousing and container trucking services to support the port operator’s box terminal operations. It has been listed on the Singapore exchange since April 12, 1993.