The Straits Times / The Business Times News on Cosco

SembMarine lifts Cosco stake to 8.17%

OIL rig builder SembCorp Marine (SembMarine) is set to be a substantial shareholder of China-based shipping group Cosco Corp Singapore after buying the entire stake of a Temasek Holdings unit.

It agreed to pay $120.34 million for 110.4 million shares in Cosco at $1.09 apiece - at an 18 per cent discount to Cosco's last traded market price of $1.33 on Friday.

SembMarine said in its announcement that the price was on a 'willing buyer, willing seller basis'. Cosco lost eight cents to close at $1.25 yesterday.

SembMarine's stake in Cosco now increases from 3.17 per cent to 8.17 per cent, crossing the 5 per cent mark that denotes a substantial shareholder.

Last September, it had sold a small stake of 4.6 million shares for $2.55 apiece. Cosco has since had a share split.

Mainboard-listed Cosco owns 51 per cent of Cosco Shipyard, which owns five major shipyards along China's coast.

SembMarine is a fellow shareholder with a 30 per cent direct stake in Cosco Shipyard.

SembMarine chief executive Tan Kwi Kin said: 'Our strategic tie-up with Cosco and Cosco Shipyard would enable us to enhance and increase our capacity to take on offshore projects.'

UOB Kay Hian Research said yesterday that it views the investment 'positively' as the alliance with Cosco will be strengthened.

Kim Eng Research said that 'the purchase price...represents good value for SembCorp Marine'.

It added that the two complement each other: 'SembMarine's technical expertise in high-value jobs and Cosco's lower shipyard operating costs.'

A Temasek spokesman said yesterday: 'We are happy and are confident that SembCorp Marine is in a good position to support the further growth of Cosco.'

While some observers have noted the relatively large discount in the sale price, Temasek is still likely to have made a hefty profit.

Temasek's Seletar Investments bought its stake in Cosco in April 2003 for $14.4 million based on reports then.

Approval is required from SembMarine shareholders.