by millionairemind » Tue Mar 30, 2010 8:45 am
Published March 30, 2010
C&G selling textile business for up to US$58m
By LYNETTE KHOO
C&G Industrial Holdings is hiving off its PET chips and yarn business for up to US$58 million - just one week after it told BT that it was considering a sale if there was a good price.
The company said yesterday that it had inked a preliminary deal to sell its textile business - for at least $49 million - to Hou Shiqing, a major shareholder of Shishi City Gangyi Dyeing Manufacture Co Ltd. The sale price is subject to further negotiations, taking into account the financials of C&G's textile arm, CHGU Group Technology Holdings International.
The buyer has paid a deposit of US$650,000 and has up to six weeks from the date of the preliminary deal to make an offer.
C&G group chief executive Cai Junyi told BT yesterday that the proposed price range was reasonable when compared with the group's net asset value excluding cash, which stood at US$52 million as at end-2009.
The company said that neither Mr Hou nor Shishi City has any links with C&G, its directors, controlling shareholders or management.
Mr Cai said that the divestment of the textile business, which has been dented by thinning margins and orders, is in the best interest of the group and shareholders.
The textile industry has become more competitive and the group would otherwise have to make substantial investments to stay ahead.
Mr Cai added that prospects were also brighter in the clean energy sector that C&G had ventured into, through its recent acquisition of waste-to-energy (WTE) firm C&G Environment Protection International.
Including two latest built-operate-transfer contracts worth 600 million yuan (S$123 million), C&G Environment has a total of nine WTE projects. Based on its secured capacity, it will be one of the top three WTE operators in China, with an annual treatment capacity of 3.3 million tonnes.
But C&G Environment's contribution to group earnings will only increase when phase 2 of the Jin Jiang plant is completed in April, and the construction of three other plants are completed by the end of this year, with another three plants by 2011.
'The textile business is still making money, so some people may question why we decide to sell now,' Mr Cai said. 'But this year, we think that it will be even more challenging for the industry given the expected rise in labour costs, currency and ongoing trade dispute between the US and China.'
'We can fetch a better price if we sell the business while it is still profitable,' Mr Cai added.
The proposed divestment is subject to shareholders' approval and other regulatory approvals.
"If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he has been wrong" - Bernard Baruch
Disclaimer - The author may at times own some of the stocks mentioned in this forum. All discussions are NOT to be construed as buy/sell recommendations. Readers are advised to do their own research and analysis.