Guangzhou Shipyard to Buy Parent’s Unit for $741 Million

Guangzhou Shipyard International Co. said it will pay 4.53 billion yuan ($741 million) for CSSC Huangpu Wenchong Shipbuilding Co. as part of an asset injection by state-owned parent China State Shipbuilding Corp.

Guangzhou Shipyard plans to issue 271.6 million shares to the parent and pay the balance of 679.1 million yuan in cash, according to a Hong Kong stock exchange filing yesterday. It will also buy shipbuilding assets from Yangzhou Kejin Shipyard Co. for 968 million yuan in the form of 68.3 million new shares.

The restructuring is part of China’s broader efforts to deal with overcapacity in the shipbuilding industry. With Huangpu Wenchong building military vessels, the purchase will also “deepen reform of military enterprises,” the company said. The company’s parent is China’s largest shipbuilder.

The company, based in Guangzhou in southern China, in September announced disposals of some units and real estate.

Guangzhou Shipyard also plans to raise 1.83 billion yuan through the private sale of 111.2 million new Shanghai-listed shares at 16.48 yuan each, according to yesterday’s filing. Guangzhou Shipyard plans to use the money to pay for the Huangpu Wenchong purchase and expand the target’s marine-engineering equipment manufacturing facilities.

Guangzhou Shipyard’s shares, which have been suspended in Shanghai and Hong Kong since April 4, will resume trading on both markets on Nov. 3.

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