London 05/01/2016 - Mercuria Energy Resources has completed a transaction to sell 51 percent of warehouse company Henry Bath & Son Ltd to CMST Development (CMSTD), a Chinese logistics provider better known as Zhongchu, it announced on Tuesday.
The deal for $60 million was agreed in principle in September last year but was subject to certain requirements and regulatory approvals.
"We are very pleased to announce the completion of this investment in Henry Bath," Han Tielin, chairman of China Materials Storage and Transportation Development Company (CMSTD) said in a release. "The strengths of CMSTD, Mercuria and Henry Bath have complementary advantages that will enable us to harness significant growth opportunities in the expanding warehouse industry in China and around the globe."
The process to sell a large part of Henry Bath & Sons Ltd started in July 2015, just nine months after Swiss-based Mercuria bought it from JP Morgan. The warehouse company operates LME-listed sheds around the world and also has non-LME warehouses in the Shanghai bonded zone.
"CMSTD is the natural partner for Mercuria and Henry Bath," said Marco Dunand, CEO of Mercuria Energy Group. "CMSTD has an extensive portfolio of logistics assets and land holdings in premium locations across China. Combined with Mercuria's global expertise, this will fuel the natural growth of Henry Bath."
CMSTD is China's largest state-owned warehouse logistics provider with over 70 distribution centers and business entities in more than 20 cities in China, 9 million square metres of land, 3.5 million square metres of open depots, 2 million square metres of warehouses, more than 70 special railway connections and over 60 million tonnes of annual handing capacity.
CMSTD owns many of the warehouses approved by the Shanghai Futures Exchange for the storage of copper, aluminum, lead and zinc.
Mercuria Energy bought Henry Bath in October 2014 as part of a deal to acquire JP Morgan's physical commodities business for $800 million. The price tag had initially been much higher at $3.5 billion but was then dramatically scaled back after certain supply agreements and inventory positions were taken off the table.
Mercuria had always favoured the route of selling a large stakeholding rather than a full divestment of Henry Bath, FastMarkets understands.
The price tag on Henry Bath is thought to have been as high as $200 million before new LME rule change proposals were announced in July 2015, further reducing the attractiveness of the LME warehousing business.
Henry Bath started to downsize its LME warehousing business last year by delisting some sheds and handing over the large fruit terminal in Rotterdam to Pacorini Metals.
(Editing by Tom Jennemann)