A joint venture company of Hengyang Petrochemical Logistics has entered into an equity transfer agreement to acquire the 49% stake held by hazardous materials handler Odfjell Terminals Asia in Odfjell’s JV, Odfjell Nangang Terminals (Tianjin).
Jiangyin Foreversun Chemical Logistics will acquire a 49% stake of Odfjell Nangang Terminals (Tianjin), currently valued at RMB 342 million ($70.9 million), which puts the 49% stake at RMB 167.6 million.
The consideration for the sale will be a nominal value of RMB 10, and Jiangyin Foreversun Chemical will take over the corporate guarantee with regard to a RMB 667 million loan owed to a financial institution in China.
As such, should the acquisition go through, Jiangyin Foreversun Chemical will be the corporate guarantor to the bank for 49% of the existing bank loan quantum.
Odfjell Nangang Terminals (Tianjin) is a joint venture company established in 2011 between Odfjell Terminals Asia and Tianjin Nangang Industrial Zone Port.
Hengyang says the JV company’s terminal is located at Tianjin Port in the Nangang Industrial Zone, and is the nearest port to the production areas in the north and northwest of China, as well as the link to Middle and West Asia, and the closest port to Beijing.
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Nangang Industrial Zone is a greenfield development planned by China to be the largest petrochemical zone in its northeast. It is expected to accommodate the production of over 200 different petrochemicals.
Hengyang says that while it will only be acquiring 49%, the proposed acquisition is “in line with its strategic efforts in enhancing its competitiveness and influence in the petrochemicals industry in China.”
This is because Jiangyin Foreversun Chemical is seeking to diversify its operations beyond petrochemical logistics alone and is in the process of transitioning towards providing a full suite of services in the petrochemicals industry.
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This includes constructing and developing a smart logistics system, creating an accessible logistics channel for liquid petrochemical products and providing integrated solutions in the field of supply chain management.
Hengyang says that obtaining the requisite initial approvals for the construction of new petrochemical terminals and storage projects is difficult, as well as the long construction periods.
As such, this acquisition facilitates Jiangyin Foreversun Chemical's entry into the coastal economic belt and presents an opportunity for it to obtain coastal petrochemical storage resources at a reasonable cost.
Jiangyin Foreversun Chemical currently has five storage areas for hazardous chemicals in the Yangtze River Basin and has largely completed its petrochemical logistics network along the Yangtze River.
Hengyang says that as Odfjell Nangang Terminals (Tianjin) is currently under-utilised and it wishes to make full use of the existing facilities, the proposed acquisition will have a positive effect on the capital, profitability and financial position of Hengyang in the long run.
This will also allow Jiangyin Foreversun Chemical to utilise the available facilities while leveraging its extensive operating experience and talent pool in the field of storage of hazardous chemicals, placing it in a position to smoothly undertake or take over the preparation and construction works of various projects in an efficient manner.
Shares of Hengyang closed flat at 24.5 cents on June 21.
