SATS to build kitchen in Tianjin town; revises stakes in China JVs with Wilmar

SATS Ltd, the chief ground-handling and in-flight catering service provider at Singapore's Changi Airport, on Monday said that it will build a central kitchen in Hexiwu Town Food Zone as part of an investment agreement between Tianjin Wuqing Hexiwu Town Government and its unit SATS China.

Under the agreement, SATS China will incorporate a subsidiary in Tianjin with a registered capital of 120 million yuan (S$23.7 million) to build and operate a central kitchen on land measuring about 20,000 square metres.

The investment is subject to further approvals from the relevant authorities. The Tianjin Wuqing Hexiwu Town Government will assist SATS China with regulatory documentation required to get the project off the ground, said SATS.

SATS must then complete construction of the facility within two years from the date of the relevant permits.

The company separately said that it would revise its shareholdings in two China joint ventures (JVs) with indirect wholly owned units of commodities firm Wilmar International, on "mutually beneficial terms". SATS wishes to acquire full control of one JV, Kunshan FoodCo, to scale its operations in China, saying it would better serve the needs of its customers in fast-casual restaurants and the aviation sector. Meanwhile, Wilmar wishes to acquire full control of a second JV, Langfang FoodCo, for its "other businesses." The JVs were inked for the parties to cooperate in the business of food manufacturing and production in China.

SATS China would take on full control of a 40-60 joint venture (JV) firm - Kunshan FoodCo - currently held by a unit of Wilmar, and another SATS unit, respectively. To do so, SATS China would buy out the 40 per cent held by Wilmar's unit Yihai Kerry Investments for 80 million yuan, and the other 60 per cent held by SATS Food Services for 120 million yuan. The transactions, done through share transfer agreements, will be paid for through internal resources.

At the same time, SATS Food Services would divest its 60-per-cent stake in another JV with Wilmar's unit - Langfang FoodCo - to the Wilmar unit for a nominal one yuan. This gives the Wilmar unit full control of Langfang FoodCo. The nominal sale comes as the second JV has not commenced any business operations. The units of SATS and Wilmar have not injected their respective share of the registered capital in this JV as well.

Shares of SATS closed on Monday at S$4.85, down four Singapore cents. Shares of Wilmar closed on Monday unchanged at S$3.25.