Hengli Heavy secures Shanghai listing as shipbuilding boom cools
The deal includes a full acquisition, asset swap, and fundraising plan, backed by a performance guarantee
Hengli Heavy has secured final approval for its backdoor listing despite a softening newbuilding market and rising global uncertainty
REJUVENATED Chinese shipbuilder Hengli Heavy Industry has received final regulatory approval for the backdoor listing it unveiled seven months ago.
Shanghai-listed Songfa Ceramic said in a stock filing that it had obtained the green light from the China Securities Regulatory Commission for its planned 100% acquisition of Hengli Heavy, completing all necessary regulatory reviews.
This move comes at a time when newbuilding orders are slowing and geopolitical uncertainties are growing, following a sustained market boom over the past four years.
Data from the China Association of the National Shipbuilding Industry shows that new orders won by domestic shipyards fell 11.1% year on year to 30.7m dwt in the first four months of this year, while the revised US port fee plan — though softened from the original draft — still poses a challenge to the country’s maritime sector.
Nevertheless, the deal marks Songfa’s complete exit from the traditional ceramics sector and a full pivot toward the shipbuilding and advanced manufacturing industries.
The transactions include an asset swap for a 50% stake in Hengli, a stock issuance to acquire the remaining shares, and a planned Yuan4bn ($544.6m) private placement.
According to the filing, the divested assets are valued at Yuan513bn, while Hengli Heavy is priced at around Yuan8bn.
The listing also involve a performance guarantee to investors that Hengli will generate at least Yuan4.8bn in net profit over the next three years.
Despite the strategic shift, Songfa’s stock remains under delisting risk, flagged with an ST (Special Treatment) prefix due to the firm’s poor finances.
In its latest publicly available results, Hengli Heavy said that by mid-October 2024, it had secured orders for 140 newbuildings worth around $10.8bn. It is also completing construction on a second $1.5bn shipyard to greatly expand capacity.
Some analysts, however, have warned of Hengli Heavy’s surging debt repayment pressures caused by the aggressive expansion and delivery risks that could dampen its earnings prospects.
