ComfortDelGro Corporation Limited (CDG) acquired all the remaining shares it does not already own in CityCab for $116.3 million on Sept 1 from ST Engineering's wholly-owned subsidiary.
CityCab, which is now a wholly-owned subsidiary of CDG, has been managed by CDG since 2005 as part of its local taxi business. Prior to the acquisition, CDG owned 53.5% of CityCab, while the remaining shares were owned by ST Engineering Land Systems (STLS).
CDG says that the full ownership of CityCab will strengthen its core point-to-point business in Singapore and allow it to better integrate and shape its global point-to-point business, adapting to market demands and boosting profit contribution.
The acquisition is expected to be earnings accretive, says the group, and the purchase consideration has been paid in full and funded through the group’s bank facilities.
In FY2024, CityCab contributed earnings of $8.7 million to ST Engineering.
The stake is carried on ST Engineering's book at $36 million as at June 30. The sale will result in a one-off gain of $77.2 million for the current financial year ending Dec 2025.
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ST Engineering plans to use the proceeds to reduce its debt load, and estimates it can save interest costs of around $4 million on an annualised basis.
The sale of this stake in CityCab is the latest in a quick succession of divestments of non-core assets by ST Engineering.
On July 17, ST Engineering and Singapore Power announced the sale of their broadband JV SPTel to Seraya Partners for an enterprise value of $290 million.
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ST Engineering says the sale will result in a one-off gain of around $80 million based on its carrying value for SPTel of around $65 million.
Less than a month earlier on June 25, ST Engineering announced the sale of its US-based construction equipment unit LeeBoy for US$290 million.
The net proceeds of some US$246 million will be used to pay down debt, saving interest costs of some US$9 million a year.
Shares in ComfortDelGro closed 2 cents higher or 1.379% up at $1.47 on Sept 1; ST Engineering shares closed at $7.61, down 0.91%.
