ST Engineering sells 49% stake in Shanghai MRO JV to China Eastern Airlines for 680.5 million yuan
Partners conclude partnership to focus on their own growth plans
[SINGAPORE] ST Engineering is selling its 49 per cent stake in Shanghai Technologies Aerospace Company (Starco) to China Eastern Airlines for 680.5 million yuan (S$124 million) cash.
The group said it’s selling its share in the maintenance, repair and overhaul (MRO) joint venture (JV) to its partner as its commercial aerospace business has built its aviation MRO presence in China over the years, with “strategically located facilities” to capture growing MRO demand in the country and region.
The JV was set up in 2004 for an initial 20-year term and provides airframe MRO services out of facilities in Hongqiao and Pudong in Shanghai. Following an extension to the JV in 2024, the companies agreed to conclude their partnership to focus on their own growth plans.
ST Engineering said on Monday (Nov 17) that wholly owned ST Engineering Aerospace on Friday inked an agreement on the Starco sale.
The group said its MRO rationalisation efforts, alongside its addition of more of such parallel facilities that are newer and more modern, enhances its operational efficiency and competitiveness.
It has anchored its presence in China with its airframe MRO facility in Guangzhou and its engine MRO facility in Xiamen. More recently, it opened an airframe MRO facility in Ezhou, Hubei, which is currently expanding with a second hangar under construction.
Its total capacity remains above pre-Covid levels, after its sale of Starco and its ongoing expansion projects in Singapore, China and the US. This ensures its ability to meet customer MRO demand, the company said.
China Eastern will pay the first tranche of the consideration of 506.7 million yuan upon the completion of the divestment. The remaining 173.8 million yuan is secured by a bank guarantee and will be paid by Dec 31, 2026.
Starco’s net profit for 2024 was about S$7.5 million. The revenue of Starco is not consolidated into the financials of ST Engineering as Starco is equity-accounted.
The group expects to pay down its debt upon receipt of net proceeds of S$116.3 million from the divestment. This will result in interest expense savings of about S$4.2 million on an annualised basis.
The divestment will yield a one-off gain of around S$48.1 million, based on the S$60.2 million carrying value for Starco.
ST Engineering closed down S$0.19 or 2.2 per cent at S$8.49 on Friday.
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