CapitaLand pays US$2.2b for properties in China

HONG KONG/SINGAPORE: Orient Overseas (International) Ltd (OOIL) has sold US$2.2 billion (US$1 = RM3.34) in Chinese property to Singapore's CapitaLand as the loss-making Hong Kong company seeks to raise cash and focus on its core shipping business.

The sale of residential, hotel, and retail properties in China will generate a lump sum of cash for OOIL which posted a net loss in the first half of last year, badly hit by the global economic crisis.

CapitaLand, which raised US$1.8 billion from the listing of its CapitaMalls shopping malls unit in November, has been increasing its footprint in China.

"This proposed acquisition is timely and an excellent strategic fit for CapitaLand," Richard Hu, chairman of CapitaLand, said in a statement yesterday.
"It also fits into our stated goal of growing our assets size in China from the present 28 per cent of total assets to 45 per cent over the next five years as we remain very confident of the long-term future of the country."

The US$2.2 billion deal includes the portfolio value of the seven sites of about US$2 billion and cash within the business of about US$262 million, CapitaLand said.

The deal with CapitaLand, Southeast Asia's largest property developer, is expected to be completed by the end of the first quarter with the approval of OOIL shareholders, CapitaLand said.

Trading in shares of OOIL, a Hong Kong-based container ship operator, and CapitaLand, were suspended yesterday pending announcements, the companies said.

Last Friday, OOIL's stock ended at HK$5.15 (HK$100 = RM43.07), while CapitaLand shares closed at S$4.28 (S$1 = RM2.41).

OOIL posted a net loss of US$231.9 million in the first half of last year versus a net profit of US$158.3 million in the year earlier period. The loss came as the global economy was still suffering through the financial crisis, taking a major toll on shipping companies that rely heavily on trade.

OOIL, which is controlled by the family of former Hong Kong chief executive Tung Chee Hwa, made a US$5.1 million loss from its properties in the first six months of last year against a US$5.9 million gain a year earlier.

The company had 1.4 million sq m of total gross floor area under development at the end of 2008 with the focus on Chinese cities, including Shanghai, Beijing and Tianjin.

OOIL also holds a stake in Beijing Oriental Plaza, which comprises a retail mall, office towers, service apartments and a five-star hotel, and Wall Street Plaza, in New York City's financial district but those assets were not included in the deal.

By Reuters