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American Shipper

COSCO to invest $545 million from IPO proceeds

COSCO to invest $545 million from IPO proceeds

   China COSCO Holdings Co. Ltd., the Beijing-based parent company of COSCO Container Line that has started formal procedures for its initial public offering in Hong Kong, plans to allocate about HK$4.2 billion ($545 million) of the IPO proceeds to capital expenditures.

   This capital spending will be “with a focus on the expansion of its vessel fleet by direct purchase of vessels or acquisitions of equity interests in other shipping companies (although the group currently has no target vessel or shipping company),” China COSCO Holdings said in its IPO documents.

   “The group intends to continue to expand its capacity and strengthen its market position both internationally and domestically,” China COSCO Holdings said.

   A new entity created by the state-owned COSCO group, China COSCO Holdings owns 100 percent of COSCO Container Lines and 52 percent of the port and container leasing company COSCO Pacific. In turn, COSCO Pacific has a 49 percent stake in COSCO Logistics.

   COSCO Container Lines shipped 3.5 million TEUs last year and is the largest container carrier in China and the seventh-largest in the world when measured by ship capacity.

   China COSCO Holdings' IPO will raise about HK$9.7 billion ($1.3 billion) from the stock exchange, the company said, using a mid-range share price.

   Besides capital investment in container shipping, the Chinese company wants to use about HK$4.2 billion ($545 million) of the expected IPO proceeds to pay back debt.

   Most of the balance of the IPO proceeds will go towards a planned spending of about HK$941 million ($121 million) to enhance COSCO’s door-to-door operations.

   Applications for China COSCO Holdings' IPO will commence Friday. It offers to sell over 2.2 billion “H” shares at a unit price of HK$4.25 (55 cents) to HK$5.75 (74 cents). The company expects to announce the final price per share of the offer June 29 and to see the start of share trading on the Hong Kong stock exchange June 30.

   After the IPO, the COSCO group will retain a controlling shareholding of 63.5 percent in China COSCO Holdings. It currently owns 100 percent of the company.

   Published pro forma accounts show China COSCO Holdings had revenue of RMB32.2 billion ($3.9 billion) in 2004, with an operating profit of RMB5 billion ($600 million), a net profit of RMB4.2 billion ($510 million) and total assets of RMB44.2 billion ($5.3 billion) at the end of last year.

   In 2004, COSCO Container Lines was the biggest arm of China COSCO Holdings when measured in revenues and its most profitable activity in terms of operating profit.

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