BT: Wilmar in joint bid for more China sites

Business Times - 30 Dec 2010

Wilmar in joint bid for more China sites

Wilmar, together with Kerry Properties and Shangri-La Asia, could invest up to 7.5b yuan in the project

By FELDA CHAY

FRESH from the successful bid for three plots of land in China's Liaoning province, Wilmar International, together with Kerry Properties and Shangri-La Asia have struck again.

This time, the trio are planning to enter a joint bid for six sites in the province that could see a total investment of 7.5 billion yuan (S$1.4 billion), with Wilmar to pump in up to 2.63 billion yuan.

This is based on Wilmar's shareholding in the joint venture (JV) firm that will be set up to see the project through, if the trio's bid is successful.

According to Wilmar's announcement after the market closed yesterday, it will hold a 35 per cent stake in the JV, while Kerry will take up 40 per cent. Shangri-La will have the remaining 25 per cent.

Wilmar said that it will fund the project using internal sources of funds and bank borrowings. It does not expect the investment to have a material impact on its financial position.

The three have paid an aggregate deposit of 271.6 million yuan to the Chinese authorities to qualify for the public bid, which will be held next Wednesday.

Wilmar has contributed 95.1 million yuan to pay for this deposit, while its partners Shangri-La and Kerry have forked out 67.9 million yuan and 108.6 million yuan, respectively.

Kerry and Shangri-La Asia are both linked to Malaysian billionaire Robert Kuok, while Wilmar is controlled by Mr Kuok's nephew.

Located in Yingkou city, the six pieces of land are designated for residential and commercial purposes - which will be granted land use rights of 70 and 40 years, respectively. They have a total gross site area of 6.1 million sq ft.

The joint bid comes after the trio bought three pieces of land in Liaoning province earlier this month for 240 million yuan, with the aim to pump in up to 2.57 billion yuan into the entire project.

Wilmar will own 35 per cent of this project, while Kerry and Shangri- La will respectively take up 40 per cent and 25 per cent.

The news sparked a sell-off in Wilmar's shares, as investors questioned the commodity firm's decision to diversify into property.

DMG said in a research report then: 'We fear this could mark the start of Wilmar's loss of business focus and corporate discipline, and do not think the venture will be well received by the market.'

Wilmar, however, appears unfazed by these worries. The firm said in its statement yesterday that it is 'in the process of searching for other suitable sites in China and may jointly bid for such sites in the future' with Kerry and Shangri-La.

In November, Wilmar said that its third quarter net profit plunged 60.3 per cent year-on-year due to the weaker performance of its oilseeds and grains division, and the absence of a big one-time gain.

Net profit for the period ended Sept 30 was US$259.5 million. In the corresponding period last year, Wilmar registered US$652.9 million in earnings, partly buoyed by a net exceptional gain of US$167 million from the sale of new shares by its Wilmar China unit.

Yesterday, its shares closed 1.1 per cent higher, or six cents, at $5.69.