Yangzijiang has no dog in the PPL Shipyard stake fight with Sembcorp

Transaction value sits only at 2.3% of its market cap.

Sembcorp Marine (SMM) may have had the last laugh with its recent acquisition of the remaining stake in PPL Shipyard (PPLS), but for its rival Yangzijiang Shipbuilding (YZJ), the move is actually a win-win deal.

SembMarine has fought to get the remaining stake back in 2010, only to be hindered by Yangzijiang when it acquired the said share from Baker Technology for US$155 million.

The company has entered an agreement with PPL Holdings Pte Ltd. (PPLH) to get a hold on the remaining 15% stake in its PPLS for $155.6 million. After the deal, PPLS will be a wholly-owned subsidiary of SembMarine.

To recall, Yangzijiang acquired 45% stake in PPLH, a former wholly-owned subsidiary of Baker Technology.

According to DBS analyst Pei Hwa Ho, the transaction was both a win-win deal for the two rivals.

"Though, it is immaterial to both SMM and YZJ, with the transaction value representing approximately 5.6% and 2.3% (adjusted for YZJ’s effective interests in PPLH) of SMM and YZJ’s market capitalisation respectively," Pei said.

More so, the analyst noted that Yangzijiang’s maneuver to divest PPLS makes perfect sense, as it already decided to shy away from the offshore sector two to three years back.

"As such, the key rationale for the PPLS investment – to shorten its learning curve in the offshore space – no longer holds. Furthermore, the consideration is almost on par with their acquisition cost in 2010, and carrying value on book, which is rather compelling in this environment," she said.

As reported, Yangzijiang said it will apply the net proceeds it will get from the acquisition towards its working capital.