Hap Seng ... Sept09

Hap Seng Consolidated Bhd has entered into an equity transfer agreement with Lei Shing Hong Venture Capital Ltd to dispose of its entire equity interest in Hap Seng Consolidated Financial Lease and Rental (China) Co Ltd, at a cash consideration of US$30.294 million.

The gains arising from the proposed disposal is expected to be about RM36 million. The company proposes to utilise the sale consideration to reduce the group's borrowings and/or to contribute to the group's working capital.

The gearing ratio of Hap Seng Consolidated is expected to decrease from 1.06 to 1.00 as a result of the proposed disposal.

The proposed disposal is in line with the group's credit finance division's strategy to focus on the domestic market, taking cognisance of recent global uncertainties in the financial market.

Going Forward …

In the surface it looks like Hap Seng’s disposal of its China listed credit leasing and financing business will enable it to reap a substantial gain on its investment. But could also mean losing the opportunity to have a toehold in China.

The asset is being sold to a company that shares a major shareholder with Hap Seng.