China’s biggest acquisition of a state-owned fleet by a private company is set to close this month after a rocky road towards a sale to a Chinese billionaire.
Local shipping and financial sources said Inner Mongolia Junzheng Energy & Chemical Group Co, controlled by coal tycoon Du Jiangtao, is closing in on the acquisition of the chemical carrier and container fleet and terminals of Sinochem International Logistics (SIL).
Chinese shipping sources’ expectations that the long-delayed deal will finalise this month come after seller Sinochem International Corp (SIC) and state-owned financial leasing companies engineered a solution to foreign creditor objections to the sale.
Some domestic financial sources are sceptical about the speed of the closing and said that although the necessary waivers have been issued in principle, credit committee approvals could still take several weeks.
The deal will see the Sinochem name disappear from chemical shipping as parent SIC concentrates on chemical production and distribution.
Regulatory approval
The buyer is said originally to have planned to keep the Sinochem brand for a transitional period but now plans to operate the assets under the new name of Shanghai Junzheng International Logistics as soon as it receives regulatory approval.
The seller and the buyer are listed companies and are said to be unable to announce the deal publicly until 2018 annual results are announced and bank approvals are final, probably next week.
But sources said meetings were held on Monday this week at SIL’s Shanghai headquarters, led by SIC officials in the morning and Junzheng officials in the afternoon, to inform staff about their future with the company.
To ease the sale, SIC has eliminated foreign debt in its shipping subsidiary by taking over ownership of about 40% of the assets attached to secured debt made up of a combination of mortgages and leases.
Meanwhile, Chinese leasing houses are issuing covenant waivers based on financial guarantees from Junzheng.
SIL’s biggest foreign lenders were Bank of America, Australia’s ANZ and Spain’s Santander. Domestic financiers include ICBC Financial Leasing, Bank of Communications Financial Leasing, CDB Financial Leasing and China Huarong Financial Leasing.
The company owns more than 50 chemical carriers, plus a large chemical tank container fleet and global terminal operations. The effect of the acquisition on SIL’s joint ventures with Japan’s Dorval Tankers and Norway’s Stolt-Nielsen remain unclear.
Chinese central state-owned enterprises such as SIC’s ultimate parent, Sinochem Group, are increasingly concentrating on their core business lines, and SIC has been looking to sell its shipping subsidiary.
The buyer is a strong listed company, a CNY 40bn company with a very low debt-to-asset ratio
Chinese shipping source
The buyer won an official auction for the equity in the company in December 2017, with an impressively well-priced bid of CNY 3.45bn ($515m). However, foreign shipping lenders had blocked the sale to the unfamiliar buyer. The debt portion of the acquisition is said to be calculated at less than CNY 10bn. Domestic players have been more comfortable with the deal, especially after Junzheng provided guarantees.
“The buyer is a strong listed company, a CNY 40bn company with a very low debt-to-asset ratio,” said one Chinese shipping source whose company has given the deal its thumbs up.
SIL staff said they are taking a wait-and-see attitude and do not believe the new owner is likely to dispose of the company until operations are stabilised.
A Junzheng spokesman contacted for comment hung up the phone immediately.
SIC general manager Liu Hongsheng — a former general manager of SIL — referred a TradeWinds request for comment to current SIL general manager Song Wei, who said the acquisition plan is “still in process”.
“There are many uncertainties,” she added. “At this moment, we have nothing to express to reporters.”
Sources said Song will continue at the helm of the new Shanghai Junzheng International. She replaced former SIL general manager Xu Junfeng last year when he resigned in the middle of the acquisition process. Xu had succeeded Liu when he was promoted from SIL to the top spot at SIC.
More recently, Xu has turned up leading an LNG shipping project backed by Gerry Wang and his Tiger Group Investments.
