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Tianjin port operators to join forces

TWO rival port operators in Tianjin, the gateway to Beijing, are set to consolidate in a deal worth nearly HK$11bn ($1.4bn). The plan will see Hong Kong-listed Tianjin Port Development Holdings pay HK$10.9bn to acquire a 56.8% stake in Shanghai-listed rival Tianjin Port Co. The two companies are already linked at senior management level, although they compete operationally for cargo at China’s third largest port. Both firms were listed separately although they are ultimately controlled by Tianjin municipal government. Tianjin Port Development plans to issue HK$7bn worth of new shares to Tianjin Port (Group) to acquire the stake in its subsidiary, Tianjin Port Co. The balance of about HK$3.9bn will be paid in cash, bank borrowings and a possible share placement and convertible bond issue. As a result of the shares and cash deal, Tianjin Port (Group) will become Tianjin Port Development’s majority shareholder with a 51% stake. The price of the new shares is around HK$2.09, a slight discount to the counter’s closing price of HK$2.25 on Friday before trading in the shares was suspended yesterday pending confirmation of the deal. No details of when the deal might be put to shareholders were given by either company although the takeover needs regulatory approval in China. But justifying the acquisition Tianjin Port Development chairman Yu Rumin said the company had “significant exposure in the container business” as a result of the global downturn. The two listed port companies have yet to release full year results for 2008. But in the first six months of last year Tianjin Port Development posted a net profit of HK$140.9m on revenue of HK$622.2m. By comparison, Tianjin Port Co generated a net profit of almost Yuan1.1bn ($161.8m) on revenue of nearly Yuan9bn. Tianjin Port Development handled about 2.1m teu and 6.5m tonnes of bulk cargo, while its rival operator saw cargo throughput of 2m teu and 109.8m tonnes in the first six months. By comparison, Tianjin port as a whole saw box volumes rise 19.7% to 8.5m teu, while bulk cargo throughput topped 356m tonnes last year. Tianjin was fourteenth in the world's top 20 container ports in 2008. The deal will give Tianjin Port Development an “increased scale of operations to be competitive against other ports” as well as management and operational efficiencies, Mr Yu said. But Reuters said that according to analysts investors may be concerned over possible earnings dilution since the Shanghai-listed A share company traded at a higher price-to-earnings ratio. “The Hong Kong-listed stock is trading at a lower P/E and it would have been more viable if they sold the Hong Kong company to the A share firm,” BNP Paribas analyst Charles Huang told the news agency.
Massive expansion plans at Tianjin were unlikely to be affected by the takeover, Mr Yu said. Tianjin Port (Group) plans to spend Yuan12.8bn to build new berths and upgrade facilities as it targets a rise in box throughput to 10m teu this year. The new facilities include a 300,000 tonne crude oil terminal.

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