Hong Kong-listed conglomerate China Merchants Holdings (China Merchants) has agreed to acquire 21.05 percent of Dalian Port, the largest port in North-eastern China, for HKD4.33 billion (€511 million; $555 million).
The transaction will see China Merchants scoop about 1.18 billion H-shares of Dalian Port at the price of HKD3.67 per share. The company will hold 21.05 percent of the port's total issued capital, making it the facility's second-largest shareholder, upon completion of the deal.
Proceeds from the placing will be used to develop Dalian Port’s oil business, optimise and integrate domestic and foreign ports, construct logistics facilities and establish the “Internet + Port” system as the port operation management platform.
“As the best financing method under overall consideration, issuing new H shares will provide necessary financial support on the strategic development of Dalian Port,” said Kai Hui, chairman of Dalian Port. The company is listed in Hong Kong and Shanghai.
Hui added that through the private placing, Dalian Port expects to introduce strategic investors with “significant influence on development, to optimise the ownership structure, strengthen the sustainable development ability, in favour of the extension of business.”
Located at the southern tip of Liaodong Peninsula, Dalian Port features a 450,000-ton crude oil terminal – currently the world’s largest – a 400,000-ton ore terminal, a mega-vessel container terminal and an automobile terminal.
It handles 68.5 percent of the imported crude oil, 96.7 percent of the international containers and 100 percent of foreign traded vehicles arriving to North-eastern China. There are currently 88 international shipping routes and 13 international direct lines calling at Dalian Port, connecting to more than 160 countries and 300 terminals around the world.
Jianhong Li, chairman of China Merchants, said that Dalian Port is one of a string of key strategic investments the company intends to make to further improve its existing port network.
“The investment in Dalian Port is not merely a financial investment, but more importantly, it enables the formation of a mutually complementary cooperation in terms of sharing of resources and operational capability. Besides, the investment in Dalian Port also signifies a great leap forward by China Merchants in the consolidation of port assets in China,” he said in the statement.
China Merchants will also have certain voting commitment for the directors and supervisors of Dalian Port to be nominated.
Focusing on port and port-related businesses in Hong Kong and China, China Merchants operates a comprehensive port network in the major coastal regions in China. It also has presence in overseas markets such as Sri Lanka, Nigeria and the US.
In 2014, the company paid a joint A$1.2 billion (€756 million; $825 million) alongside Australia's Hastings Funds Management to acquire the 98-year lease of Port of Newcastle in New South Wales.