Sime Darby said on Friday a joint venture was an ideal approach under the current situation to sustain expansion while reducing investment costs and exposure.

Under the corporate exercise, Sime’s unit Sime Darby Overseas (HK) Ltd is selling a 49% stake in the China incorporated WSDLT while Weifang Sime Darby Port Co. Ltd is disposing of a 1% stake. 

The sale to DCGHL’s indirect unit Overseas Hong Kong Investment Ltd (OHKIL) is for a combined total cash consideration of 60.85mil renminbi (RM39.15mil). 

After the sale, Sime Darby Overseas’ stake in WSDLT will be reduced from 99% to 50%.

Sime Darby said the funds received from the sale would be used for working capital requirements of the Sime Darby Group’s energy & utilities (E&U) China operations or to fund future expansion of E&U China other operations, if required.

“The main objective of the proposed transaction is to accelerate the growth of bulk liquid business of WSDLT by leveraging on the strength of DCGHL,” it said.

Sime Darby said DCGHL has the technical know-how and industry experience imperative to the construction and operation of an integrated liquid terminal.

The collaboration with industry expert DCGHL will ensure not only the timeliness and quality of construction, but also the safety and reliability of the subsequent operations of the project.

It added safety is DCGHL’s top priority in businesses dealing with liquefied petrochemical products.

Sime Darby also highlighted DCGHL’s well-established terminal networks and customer base would pave the way for the long term growth of the liquid business in WSDLT.

“Furthermore, partnering with a right player with the right resources and expertise will open opportunities for WSDLT to enter into certain specialised and lucrative markets such as the liquefied chemical logistics and storage.

“It is in the interests of E&U China to take a pragmatic approach in balancing the risk and return trade-off of its large scale investments amid the challenging business environment,” it said.