An intra-group deal will see CSSC Offshore & Marine Engineering Co (Comec) take over Wenchong Dockyard, a loss-making vessel repair yard that can also manufacture transport equipment.
In an exchange filing, the Shanghai- and Hong Kong-listed Comec said its subsidiary Guangzhou Shipyard International agreed to acquire the whole of Wenchong Dockyard for a total of CNY 498.3m ($71.9m).
GSI will pay CNY373.5m to China State Shipbuilding Corp (CSSC) for 74.96% of Wenchong Dockyard and CNY124.8m to China Unite Shipbuilding for 24.04%. Subject to shareholders’ approval, the cash deal will be funded by GSI’s own financial resources.
Comec and China Unite Shipbuilding are both ultimately controlled by CSSC, one of the Chinese state-owned shipbuilding conglomerates.
The deal is “to alleviate the issue of insufficient wharf resources of GSI, improve its productivity, expand its ship maintenance and modification business, modular non-ship business and environmental protection business, and to increase its competitiveness,” Comec said in the filing.
Wenchong Dockyard, adjacent to GSI’s Nansha plant, has the capacity of maintaining and retrofitting 180 general ships per year while manufacturing railway, ship, aerospace and other transport equipment.
The facility is also capable of undertaking maintenance and modification projects for floating production storage and offloading units and various offshore engineering ships, according to the filing.
Wenchong Dockyard has been making losses in recent quarters, however, with limited ordering activity in China.
The company made net losses of CNY 136.6m on turnover of CNY 379.8m in the first nine months of 2018. In 2017, net losses amounted to CNY 146.7m on turnover of CNY 651.5m.
As of September 30, Wenchong Dockyard held total assets of CNY 2.5bn. When taking debts into consideration, net assets amounted to CNY 34.8m.
