KUALA LUMPUR: Sime Darby Bhd's unit is divesting its stakes in three joint ventures operating three river ports in Jining in the Shandong province of China for RM181.6mil as it seeks to exit its non-core assets.
It said in a statement on Tuesday Sime Darby Overseas (HK) Ltd had entered into a series of agreements with Jining Port and Shipping Development Group Co., Ltd (JPSDG) to divest its entire interest in the three JVs.
On Monday, SDOHK signed equity transfer agreements to dispose of its entire 70% equity interest in Yuejin, Longgong and Taiping ports in Jining to JPSDG.
SDOHK also signed a shareholders’ agreement to subscribe to a 49% interest in a new JV; and equity transfer agreements between SDOHK and JPSDG to divest SDOHK’s 49% interest in the JV over three years.
Sime Darby group CEO Datuk Jeffri Salim Davidson said the agreements allowed for a staggered exit from its investment in three Jining Ports over three years and it was very much in line with its strategy to divest non-core assets of the group.
“At the turn of the decade, Sime Darby developed a 'China Growth Strategy'. We invested significantly in growing our motors and industrial footprint in China, as well as developing the ports business in Shandong province.
“This strategy has been largely successful, and China now accounts for almost 40% of the group’s revenue. Nevertheless, with the demerger and our focus on our trading businesses, the ports business is no longer considered a core business of Sime Darby.”
Jeffri pointed out that over the years, Sime Darby had a total of RM179.8mil in the Jining ports, which have contributed RM87.10mil in dividends to the group.
“However, the operations are facing continued downward pressure on margins due to intense competition from neighbouring ports and additional costs. Given these factors that are impacting the inland port sector in China, we consider the disposal price reasonable.
“Our disposal strategy also very much fits in with the exercise being undertaken by the Jining government to consolidate the fragmented river port industry in Jining. So, it is a win-win situation for us and for the Jining government, ” he explained.
State-owned enterprise Jining Energy Development Group Co., Ltd, the parent company of JPSDG, has provided unconditional and irrevocable letters of guarantee for JPSDG’s obligations. These are also supported by bank guarantees provided by JPSDG.
The equity transfer agreements to dispose of SDOHK’s entire 70% equity interest in Yuejin, Longgong and Taiping ports in Jining to JPSDG are to be completed within one month.
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