Group gains control of ailing port facility
(China Daily)
Updated: 2004-12-18 09:16

Port-to-finance conglomerate, China Merchants Group, will consolidate port infrastructures in western Shenzhen.

It signed a framework agreement with Shenzhen Nanyou Group on Friday to restructure the 20-year-old State-owned Enterprise (SOE) that has the rights to develop some 23-square-kilometres of land in Shenzhen's Nantou Peninsula and the surrounding area.

With a registered capital of 248 million yuan (US$30 million) in 1984, the SOE developed into a company with total assets of 5.7 billion yuan (US$686 million) in 1999.

Its 19 wholly subsidiary and nine controlling companies had been involved in the industries of real estate, ports and logistics and trade.

Poor management and rigid operating systems nearly paralyzed the company and left it with massive debt levels.

China Merchants Group, as well as its associates, will inject cash to salvage the debt-ridden SOE, for a final 76 per cent stake in it, said Vice-Mayor Zhang Siping at the signing ceremony. Shenzhen Investment Holdings Co, which manages the city's State assets, will take the remaining 24 per cent.

Fu Yuning, president of China Merchants, said it took nearly three years' negotiation for the two parties to reach a consensus in terms of a series of focuses including the capital augment, assets division, system transformation, land right, debt restructuring and employees compensation.

"The move will allow China Merchants to integrate the port resources, carry out better strategic arrangements to co-ordinate the development of the western ports and improve the efficiency," Fu told reporters.

He refused to release the debt amount given the legal reasons but admitted it's quite huge.

China Merchants Holdings (International) Co Ltd, a Hong Kong-listed port arm of the group, has heavily invested in the dramatically growing western ports of Shenzhen, including Shekou Container Terminals Co and Shenzhen Chiwan Wharf Holdings.

The Shekou Container Terminals Co, where China Merchants Holdings has a 32.5 per cent stake in its first phase and a 51 per cent stake in the second phase, handled a total of 1.9 million TEUs (twenty-foot equivalent units) goods in the first 11 months of this year, representing a year-on-year 40 per cent increase.

Close