SINGAPORE (Oct 2): Chip Eng Seng Corporation (CES) is acquiring Sembcorp Industries’ (SCI) commercial construction business unit for $49.9 million, both Mainboard-listed companies announced in separate SGX filings on Wednesday.

Chip Eng Seng Construction, a wholly-owned subsidiary of CES, has entered into a sale and purchase agreement with Sembawang Corporation, a wholly-owned subsidiary of (SCI), to acquire Sembcorp Design & Construction (SDC).

SDC is a design and build construction service provider with a track record of undertaking various civil and building infrastructure projects.

It also has a number of ongoing projects, including the construction of the Marina South Station tunnels and station for the Thomson Line MRT, the construction of foundation works for the Changi Water Reclamation Plant, and the second package of works relating to the development of a three-runway system at Changi Airport.

The proposed acquisition will only involve SDC’s commercial construction business. SCI will retain SDC’s defence-related construction business by transferring its stake to wholly-owned subsidiary Sembcorp Specialised Construction (SSC).

CES says the proposed acquisition will extend the footprint of the group's existing construction business.

“The group will also benefit from SDC's capability and track record, which will enhance the ability of the group to participate in tenders for a broader range of projects, such as civil engineering and building infrastructure projects,” CES says in its bourse filing.

CES intends to fund the acquisition via internal cash resources.

Meanwhile, SCI says the divestment is in line with its strategy to unlock value and recycle capital as it repositions to be a global integrated energy player.

The transaction is expected to be completed by the end of this year. Upon completion of the sale of the commercial construction business and transfer of the defence construction business to SSC, SDC will cease to be part of the SCI group.

Both CES and SCI say the proposed transaction is not expected to have a significant impact of their net tangible assets and earnings per share or the current financial year.

As at 11.20am on Wednesday, shares in Chip Eng Seng are trading flat at 63 cents while shares in Sembcorp Industries are trading 7 cents down, or 3.3% lower, at $2.06.

See also: Regulator probes Chip Eng Seng's 2018 married deal with Tangs