Mergers & Acquisitions

HNA offers to buy Singaporean logistics firm CWT for S$1.4 billion

The offer illustrates Chinese companies believe industrial commodity prices will trend higher, analysts say

PUBLISHED : Monday, 10 April, 2017, 12:26am
UPDATED : Monday, 10 April, 2017, 10:13pm

The Singapore listed shares of logistics and commodity firm CWT Group rose 10 per cent to a one-year-high on Monday after Chinese conglomerate HNA Holdings offered to buy the company for S$1.4 billion (US$1 billion) on Sunday.

CWT traded at S$2.28 (US$1.62) per share during the morning session, up 10 per cent from its previous close on April 5.

HNA in Hong Kong was up 1.5 per cent to 34 HK cents.

“The deal is sensible as CWT is a global company with logistics and commodities trading. This would help HNA to expand into the logistics and commodities trading business in the international market,” said Jasper Lo Cho-yan, chief strategist at King International Financial Holdings. “Chinese companies are positive on the commodity price and outlook.”

Lo said it’s widely believed that US president Donald Trump will follow through on plans for infrastructure rebuilding projects, which will bolster demand for industrial commodities.

“In addition, the ‘One Belt, One Road’ initiative by China would also result in more infrastructure projects in the countries along the route. This would also push commodities prices up,” he said.

The belt and road scheme promoted by Beijing will lead to new roads, railways, energy projects and other infrastructure projects in 60 countries in support of enhanced trade and transportation.

HNA Holding Group has offered to buy Singaporean logistics firm CWT Group for S$1.4 billion (US$1 billion), reflecting its latest asset purchase after having spent more than US$30 billion on acquisitions around the world since last year.

The Hong Kong-listed unit of HNA Group would offer S$2.33 each for CWT’s 600.3 million outstanding shares, representing a 13 per cent premium above the stock’s last trading price on April 5 before it was suspended, pending an announcement, the company said in a stock exchange filing on Sunday night.

HNA Group is a Chinese conglomerate based in Hainan with businesses ranging from financial services, tourism and aviation. It is also the owner of Hainan Airlines.

HNA’s listed arm proposes HK$9.26b rights issue to fund Kai Tak land purchases

Established in 1970 as a private arm of the Port of Singapore Authority, CWT is a leading provider of logistics, commodity trading, financial and engineering services with operations in 90 countries. The company was listed on the Singapore Exchange in 1993.

Its commodities trading business includes physical trading, warehouse and supply chain management of base metal non-ferrous concentrates and other minor metals and energy products like naphtha and distillates.

According to its 2016 results, commodities trading had revenue of S$8.2 billion, representing 88 per cent of total revenue, But this business only produced 14 per cent of profit before tax at S$18.3 million. Meanwhile, the logistics business reported a 2016 profit of S$61.1 million, representing 47.3 per cent of its annual profit before tax.

CWT’s major shareholders, including C&P Holdings and Loi Kai Meng among others, hold 65.13 per cent of the company. If 90 per cent of its shareholders accept the offer, it will become compulsory.

Preconditions for the deal include approval by Singapore’s anti-monopoly body and support by HNA shareholders during an upcoming meeting.

The group [will] closely [monitor] the economic and trade development situation in the ‘One Belt, One Road’ initiative, Southeast Asia and other regions

HNA said the acquisition was “strategically beneficial to the group” as it sought to diversify from tourism and property to become a leading logistics player with global reach.

“The group seeks merger and acquisition targets in sectors including logistics, real estate, logistics warehousing, bulk commodity trading, logistics finance and logistics transport facilities while closely monitoring the economic and trade development situation in the ‘One Belt, One Road’ initiative, Southeast Asia and other regions,” HNA said in the filing.

The company said the deal would be financed by internal and external resources, including an interest-free unsecured fund of no more than S$1.4 billion to be granted by its associates.

HNA last month reported a 2016 net loss of HK$21.9 million (US$2.8 million) – its sixth consecutive year of losses – after persistent bad weather and fierce competition eroded its golf and hotel revenues at the Dongguan Hillview Golf Club.

HNA’s Hong Kong-listed unit reports net annual loss of HK$21.9m on revenue of HK$182.54m

In the same month, the group agreed to buy a 25 per cent stake in Old Mutual’s US asset management unit for about US$446 million.