Top Biz News

Ship diesel maker to expand via share sale

By Chen Liying (Shanghai Daily)
Updated: 2007-01-30 17:19

Hudong Heavy Machinery Co, China's biggest maker of diesel engines for ships, plans to raise 12 billion yuan (US$1.5 billion) in a share sale that will fund its purchase of shipyards and allow it to invest in new technologies.

The company will sell up to 400 millionA sharesat 30 yuan apiece in exchange for nine billion in assets and three billion yuan in cash, Hudong Heavy said in a statement to theShanghai Stock Exchangeyesterday.

The company's controlling shareholder, China State Shipbuilding Corp, will buy 59 percent of the share issue. The other buyers includeBaosteelGroup Corp,China Life InsuranceCo,ShanghaiElectric Group Corp andCITIC Group.

With the proceeds, Hudong will buy 100 percent of Shanghai Waigaoqiao Shipbuilding Co and CSSC Chengxi Shipyards and 54 percent of Guangzhou Wenchong Shipyard. It will also invest in technology upgrades.

"The share sale will more than double Hudong Heavy's current market value of 10.9 billion yuan," said Zhu Anping, an analyst at Shenyin & Wanguo Securities Co. "Hudong will expand its business into shipbuilding after the deal and capitalize on the booming industry."

Shanghai Waigaoqiao, which contributed half of CSSC's production last year, turned out more than 3.12 million dead-weight tons of ships in 2006, becoming the first and only Chinese shipyard to list among the world's top 10 in terms of production and orders in 2006.

CSSC Chengxi and Guangzhou Wenchong are the nation's leading ship repair yards.

Hudong Heavy's net assets will be increased to 13.2 billion yuan from 1.2 billion yuan at the end of 2006, if the acquired assets are included, Hudong said.

Its net profit is forecast to expand to 1.5 billion yuan from the 250 million yuan.