Sinotrans will streamline China operations

Sinotrans, China’s largest transport company, will integrate dozens of its smaller subsidiaries into two listed firms by 2010 as it prepares for an IPO (initial public offering) in Hong Kong later this month.

The IPO could be worth up to US$1.69 billion.

Sinotrans vice-president Zhang Jianwei said the smaller companies would be merged into Sinotrans Shipping and its existing Hong Kong-listed company, Sinotrans.

Zhang Jianwei said at the same time Sinotrans Shipping would become the group’s bulk shipping flagship. This consolidation will help boost the total turnover of the Sinotrans Group to a forecast $10 billion by 2010.

Sinotrans Shipping has priced its offer at 12 to 14 times the firm’s 2008 earning forecast of $300 million. Trading in the shares will start on November 23 and seven cornerstone investors have already subscribed for a total of $175 million worth of shares and will very likely make a great deal of money.

These include Li Ka-shing, one of Asia’s richest men and chairman of Hutchison Whampao, which controls leading port operator Hutchison Port Holdings.

Other key investors are three Chinese shipping and port giants — China Cosco Group, China Shipping Group and China Merchants Group — together with Ping An Insurance, Lee Shau-kee, chairman of Henderson Land Development, and hedge fund Citadel Investment Group.

Sinotrans Shipping, which was founded in Hong Kong in February 2003, has 26 bulk carriers, three single-hulled very large crude carriers and five small container vessels in its fleet.

The firm said proceeds from the IPO will be used to expand its fleet and acquire shipping companies and repay bank loans.