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Sapphire Corp to divest 43.9% stake in Ranken Railway for 280m yuan
MAINBOARD-LISTED infrastructure design and construction group Sapphire Corp on Tuesday said it has inked an agreement to sell a 43.87 per cent stake in Ranken Railway for some 280 million yuan (S$55.2 million) in cash.
The buyer is Shandong Hi-Speed Road & Bridge Investment Management (SHRBIM), which has also agreed to fork out 75.7 million yuan to subscribe for an additional 71.1 million shares in Ranken amounting to about 10.6 per cent of the unit's enlarged share capital.
Upon completion of the transactions, Sapphire will retain a 48.82 per cent effective interest in Ranken.
Sapphire said the proposed transactions will also result in Ranken becoming an indirect and partial state-owned enterprise (SOE) in China. Ranken will then be able to tender for key infrastructure projects in the country, a process which requires contractors or vendors to be state-owned.
This is possible as the buyer, SHRBIM, is wholly owned by Shenzhen-listed infrastructure construction firm Shandong Hi-Speed Road & Bridge Co Ltd, which is in turn 60.66 per cent owned by Shandong Hi-Speed Group, an SOE headquartered in Jinan City, Shandong province.
With Ranken becoming an indirect and partial SOE in China, it will be in a "more favourable position" to secure contacts in the country and "may be able to enjoy lower interest rates on external borrowings from financial institutions", Sapphire said.
In addition, Ranken faces strong competition in tendering for such projects, most of which have been awarded to SOEs.
Sapphire will have the opportunity to participate in the future growth of Ranken, by retaining a meaningful stake in it, said Sapphire chief executive Wang Heng.
The gross cash consideration of 280 million yuan will also increase the group's financial flexibility to strengthen its balance sheet, she added.
Sapphire will convene an extraordinary general meeting to seek shareholders' approval for the proposed transactions.
The company had called for a trading halt on May 28. It lifted the halt on Tuesday morning after announcing the Ranken deal.
As at 9.57am on Tuesday, Sapphire shares were trading at 9.2 Singapore cents, up 3.7 cents or 67.3 per cent.