The Acquisition of CSP, What For?

COSCO SHIPPING Ports Limited (hereinafter referred to as CSP) issued a public announcement on August 23, claiming that Port of Shanghai, a wholly-owned subsidiary of CSP, intended to sign a consortium agreement with COSCO SHIPPING Tianjin and one or more investors. The consortium would seek to acquire a maximum of 5.52 billion CCCC DREDGING Shares ( accounting for about 40% of the company’s enlarged issued share capital) from China Communications Construction CO., Ltd. on property rights exchanges in a public tender process within China.

According to the consortium agreement, if the consortium succeeds in the tender process, Port of Shanghai, COSCO SHIPPING Tianjin and other investors would respectively acquire 1.38 billion and 690 million CCCC DREDGING Shares (accounting for about 10% and 5% of the company’s enlarged issued share capital respectively) as well as the rest sales stock. If the number of sales shares of CCCC DREDGING is less than 2.07 billion (which accounts for about 15% of the company’s enlarged issued share capital), the number of CCCC DREDGING Shares that Port of Shnghai and COSCO SHIPPING Tianjin seek to acquire will be agreed between them and specified in the consortium agreement. As a result, Port of Shanghai will acquire no more than 1.38 billion CCCC DREDGING Shares (which accounts for about 10% of the company’s enlarged issued share capital). The consideration for the joint acquisition will not exceed RMB 2.47 per share of CCCC DREDGING unless it is agreed by all members of the consortium. Therefore, the consideration payable by Shanghai Terminal will not exceed approximately RMB 3,409 million.

The announcement shows that there is synergy between CCCC DREDGING and COSCO SHIPPING.

CCCC DREDGING is the world's largest dredging company with a domestic market share of about 70%. With relatively stable investment returns and a considerable business volume, it remains the market leader in the industry. Besides, CCCC DREDGING has been actively participating in environmental protection and developing marine engineering business as well as expanding its overseas business  of great potential. It is expected that the relevant cooperation with CCCC DREDGING would provide stable net profits and growth potential for China COSCO SHIPPING.

There has been a strong dredging demand for newly-built terminals asquisited by CSP since 2017. Relevant strategic investments will help CSP extend its port business by taking advantage of CCCC DREDGING’s leading position in the market. As a result, the acquisition would help COSCO SHIPPING enter into the upper industry chains, exerting a cooperative effect on overseas distribution.

The terminal portfolio of COSCO SHIPPING Ports Limited(CSP) covers the five main port regions in Mainland China, Southeast Asia, Middle East, Europe, South America and the Mediterranean Sea. CSP said that the investment in CCCC Dredging CO,LTD, who has high profile and rich experience in overseas dredging, enabled CPS to further improve its overseas layout, implement the "One Belt And One Road" initiative, and strengthen CPS' leading position as a global terminal operator.

It is worth mentioning that China Communications Construction Company Limited (hereinafter refered as CCCC), the parent company of CCCC Dredging CO,LTD , announced on July 16 that it would set up a joint venture to establish the overseas platform for port operating. The establishment of the joint venture means that CCCC will gradually promote its transformation from a port infrastructure service provider to a port operator, competing directly with CSP,the world's leading port operator.

Gangkouquan Inc. believes that CSP's acquisition not only improves its own strength in operation, but also indicates that more competition and cooperation will come with the participation of new players.