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Sembmarine disposes of entire 30% stake in Cosco Shipyard Group

Sembmarine disposes of entire 30% stake in Cosco Shipyard Group
Singapore’s Sembcorp Marine has entered into a sale and purchase agreement with China Ocean Shipping (Group) Company (Cosco) to dispose of its 30% equity stake in Cosco Shipyard Group (CSG), valued at RMB1.06bn ($154.66m).

Upon completion of the disposal, Sembmarine will cease to have any interest in CSG except via its 4.98% shareholding in Cosco Corporation (Singapore) Ltd, which in turn has a 51% equity interest in CSG.

The net proceeds for Sembmarine, after deducting capital gains tax and realisation of foreign currency translation reserves, represent a gain of around SGD48.32m ($34.21m) over the carrying value of the investment in CSG of SGD180.1m.

“The disposal is being undertaken by the group to realise its investment in CSG, which is no longer a strategic investment nor a core asset of the group, and the disposal will not affect the nature of the group’s main businesses,” Sembmarine stated.

The net proceeds will be used for working capital.

The boost in working capital will be welcomed by Sembmarine, which admited during its third quarter results announcement that it is keenly watching its cashflow and has implemented cost cutting measures including the reduction of about 8,000 jobs. The group posted a third quarter loss of SGD21.79m as against the profit of SGD32.11m in the same period of 2015.

Sembmarine had purchased the 30% stake from CSG back in 2004 at a price of SGD49m. Back then, Sembmarine already owned 20% of Cosco Dalian Shipyard, and subsequently transferred the 30% stake to the enlarged capital of CSG, bringing its total investment in CSG to SGD70m.

CSG is a ship repair, conversion and shipbuilding group in China which owns six major shipyards that are located in the key coastal cities stretching from Dalian in the north, Nantong, Shanghai, Qidong and Zhoushan in the centre, to Guangzhou in the south.

Cosco, meanwhile, has completed a merger with compatriot China Shipping (Group) Company to form China Cosco Shipping Corporation Limited (Cosco Shipping).

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