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Hengyang Petrochemical to pay 36m yuan for full control of main subsidiary
CATALIST-LISTED petrochemical storage company Hengyang Petrochemical Logistics is consolidating its stake in a principal subsidiary for 36 million yuan (S$7.33 million) in cash, the board said in a bourse filing on Tuesday.
Hengyang Petrochemical will buy out the 35 per cent interest in Hengyang Holding Pte Ltd (HHPL), now held by a company owned by Macquarie Greater China Infrastructure Fund, under a conditional sale-and-purchase agreement signed on Sept 17.
The deal, which would turn HHPL into a wholly-owned subsidiary, will improve Hengyang Petrochemical's profitability and enhance shareholders' value in the long term, the board told shareholders as it laid out the rationale for the transaction.
It said that it does not regard the planned purchase as subject to requirements for a shareholder vote, since "the company is of the view that the asset acquired is part of the company's existing business" and will not materially change the group's risk profile.
But, if an extraordinary general meeting must be convened, executive chairman and chief executive Gu Wen Long, who with his personal investment vehicle owns a combined 56.1 per cent of Hengyang Petrochemical, will vote in favour of the deal.
The board added that it believed the planned acquisition, which would be funded by internal resources, "is in the best interests of the company and its shareholders".
HHPL, which is Hengyang Petrochemical's intermediary investment holding company, builds and runs petrochemical terminals and offers warehousing and logistics services. It last logged a net loss of 16.5 million yuan for the six months to June 30, with net tangible assets (NTA) of 572.4 million yuan. Based on its unaudited accounts, the NTA of the sale shares came up to 200.4 million yuan.
"Shareholders and potential investors are advised to exercise caution when dealing in the securities of the company," said the board. "There is no certainty or assurance that the proposed acquisition will be completed."
Shares of Hengyang Petrochemical, which called a trading halt, last changed hands at S$0.15.