SINGAPORE (June 2): Engineering firm Sapphire Corporation announced on Tuesday that it is divesting its 43.87% equity sake in its subsidiary Ranken Railway for a cash consideration of RMB280 million (S$55.3 million).
Ranken Railway is Chengdu Kai Qi Rui Business Management (Chengdu KQR)’s 99.6%-owned subsidiary, and Chengdu KQR is Sapphire’s 98%-owned subsidiary.
The total consideration represents 314% of Sapphire’s market capitalisation based on its closing price on Monday.
The deal was made with Shandong Hi-Speed Road & Bridge Investment Management (Shandong Hi-Speed), who will subscribe for more shares in Ranken Railway. The shares amount to some 10.6% (with a consideration of RMB 75.7 million) of the enlarged equity capital post-proposed transactions.
Shandong Hi-Speed’s sole shareholder, Shenzhen-listed Shandong Listco, is a majority-owned by a wholly-state-owned enterprise in China. This means Ranken Railway will become an indirect and partial state-owned enterprise (SOE) and it will be able to tender for key infrastructure projects in the PRC which require contractors or vendors to be state-owned.
Shandong Listco has a market capitalisation of approximately RMB 5.24 billion with an order book of some RMB 22.1 billion as at Dec 31, 2019.
Upon the completion of the transaction, Sapphire will retain a 48.82% stake in Ranken Railway.
“While unlocking value for shareholders, we believe that this strategic divestment to Shandong Hi-Speed can significantly enhance the value and prospects of Ranken Railway with the combination of both companies’ capabilities and resources to tap new market opportunities in urban railway infrastructure and water environmental management projects,” says Wang Heng, CEO of Sapphire.
“And by retaining a meaningful stake in Ranken Railway, we have the opportunity to participate in the future growth of Ranken Railway as an indirect and partial state-owned enterprise in the PRC. Notably, the gross cash consideration of RMB280 million will give the Group’s increased financial flexibility to strengthen our balance sheet and create optionality in our other business areas,” she adds.
As at 9.07am, Sapphire shares are changing hands 81.8% up, at 10 cents.