Chinese cargo transport firm Chu Kong Shipping Enterprises Group is set to acquire a majority stake in Hong Kong ferry services company New World First Ferry Services (NWFF) in a deal worth around HK$232.8 million or roughly $30 million. Once the deal is completed, NWFF will become a non-wholly owned subsidiary of Chu Kong Shipping.
Chu Kong Shipping announced on Monday that it will be acquiring a 60 percent stake in NWFF. The deal to buy a majority stake in NWFF, which currently runs five inner harbor and outlying island ferry routes in Hong Kong, is expected to be completed by the end of this month. The rest of the company's 40 percent stake will remain with its parent company, NWS Holdings, which in turn is owned by Hong Kong's New World Development.
In an exchange filing, Chu Kong Shipping stated that the ferry services provided by NWFF should complement its cargo transport and storage business. Chu Kong Shipping operates both cargo and passenger ferry services between Hong Kong and mainland China. To fund the acquisition, the company stated that it had tapped into its "internal resources" for the deal.
After it acquires NWFF, Chu Kong Shipping stated that the current fares and operations of the company's ferries will remain the same until the end of its existing licenses. Both companies had agreed that management and staff structures will remain untouched. All employee benefits and compensations will also remain the same.
After the licenses expire, the company stated that its fares will be based on the terms and conditions provided by the government during the renewal process. NWFF mentioned in a separate statement that it welcomes Chu Kong Shipping as its new stakeholder. Chu Kong Shipping had stated that it plans to make additional investments in NWFF's operations, with the goal of enhancing its efficiency and workforce stability to spur continued growth.
Last year, NWFF's operations were heavily affected by the global economic downturn caused by the China-US trade war and the months of domestic unrest. For its fiscal year ending in June, the company reported a 27 percent decrease in its net profits after tax to HK$30.3 million. As of last year, the company's net asset value was estimated to be around HK$105.million.
The price paid by Chu Kong Shipping for the 60 percent stake was based on the NWFF's current business, historical performance, and future prospects. The fair market value of the company's existing assets was also taken into account during negotiations.
