Kerry Properties

Kerry buys mainland logistics firm

PUBLISHED : Monday, 27 September, 2004, 12:00am
UPDATED : Monday, 27 September, 2004, 12:00am

The investment enables the group to consolidate its interests in the sector

Kerry Properties has agreed to acquire a controlling stake in an international freight forwarding and logistics services provider on the mainland for about 380 million yuan.

In an announcement issued yesterday, Kerry Properties said its wholly owned subsidiary, Kerry Logistics Network, had agreed to acquire a stake of up to 70 per cent in a state-owned firm, Eas International Transportation (Eas PRC).

Eas PRC, a Sino-foreign joint venture, provides supply-chain management services, including international and domestic freight forwarding and express services, China-wide warehousing and distribution, exhibition forwarding and bonded logistics centres.

'The acquisition is a strategic step in the expansion and consolidation of the logistics businesses of the group,' said Kerry Properties chairman Ang Keng-lam.

'It will enable the group to further expand its business in China and strengthen its pan-China logistics network.'

In April, the group said it aimed to bolster revenue from its logistics and warehouse business by 20 per cent to $2 billion next year.

The logistics and warehouse division was its top revenue source last year, with receipts of $1.66 billion, up from $391 million in 1999.

Kerry Properties said the price paid represented 9.8 times Eas PRC's unaudited profit [after tax and extraordinary items] over the past 21/2 years, based on a 70 per cent share of those profits.

The price tag also represents an acquisition premium of about 100.96 million yuan on top of a base price of 279.03 million yuan, which is equivalent to 70 per cent of Eas PRC's net asset value. Kerry Properties said the 9.8 average price-earnings multiple was a reasonable yardstick to use in valuing the acquisition.

'Eas PRC is a long-established and leading international freight forwarding and logistics services provider ... with a well developed pan-China operation network and a portfolio of properties which is of high quality with potential of further appreciation,' said Mr Ang.

The acquisition, which will take place in two stages, will be financed by either internal cash reserves or bank borrowing. In the first stage, to be completed by December 31 this year, a 50 per cent stake in Eas PRC is to be acquired from Treasure Lake, a wholly owned subsidiary of state-owned Huatong Industrial Development.

The second stage involves the acquisition of another 20 per cent stake from Huatong, leaving it with a 30 per cent interest in Eas PRC.

Trading in the shares of Kerry Properties has been suspended since September 21 pending the announcement. The counter last closed at $14.75.