Titan Petrochemicals Group said it would buy its parent Titan Oil's shipbuilding start-up venture for US$170 million as it seeks to further diversify from the volatile crude oil transport business. The announcement came as Titan Petrochemicals reported a 25 per cent decline in first-half underlying profit to HK$48.4 million. Net profit, including a HK$105.06 million one-time gain on vessels disposals, rose 132 per cent to HK$151.71 million. The company yesterday signed a deal with Singaporean businessman Tsoi Tin Chun, the majority shareholder of Titan Petrochemicals and Titan Oil, under which it will pay Mr Tsoi US$56.9 million for the venture, Titan Quanzhou Shipyard. The remaining US$113.1 million will be paid by issuing ordinary and preference shares that will raise Mr Tsoi's stake in Titan Petrochemicals to 60.9 per cent from 50.8 per cent. The issue price of 63 HK cents represents a 1.61 per cent premium to yesterday's closing price of 62 cents. Shareholders will meet next month to approve the deal. 'The acquisition is consistent with our overall strategy to diversify our earnings base,' chief executive Barry Cheung Chun-yuen said. Titan Petrochemicals continued to be hit by falling crude oil transport rates in the first half amid rising supply of very large crude carriers. A HK$38.86 million jump in interest charges and a HK$48.23 million increase in administrative expenses also dragged down profits. Mr Cheung said the acquisition was struck at an attractive price, at 22.7 times the targeted pre-tax profit of US$7.5 million from the acquired assets for next year, 8.5 times in 2009 and 3.4 times in 2010, compared with 23.5 to 39.9 times of rivals based on this year's estimated profits. The targets were profit thresholds undertaken by Mr Tsoi. If the actual profits turn out to be less than these, the number of shares issued to him will be cut. If none of the targets is met, the acquisition price will be pared to US$141.4 million. The assets consist primarily of a shipyard in Quanzhou, Fujian province, focusing on making vessels of less than 100,000 deadweight tonnes, mainly bunker barges and chemical tankers. Of the 22 vessels on its US$210 million order book, 10 came from the company itself and the remainder from parent Titan Oil. Mr Cheung said the shipyard delivered its first vessel last month and was due to send its second one this month. It is expected to be capable of building 10 more next year, 12 in 2009 and 26 in 2010. Titan Oil invested 800 million yuan in the shipyard and related facilities, with an additional 1.6 billion yuan needed to complete its expansion. About 70 per cent of this will be loan-financed. A ship-repair yard will be built next to the shipyard by the end of 2009. Mr Cheung said it would be one of the largest in Asia, with four docks of up to 420 metres, allowing it to accommodate the world's largest container vessels.