Boston, MA 03/20/2014 (wallstreetpr) – WSP Holdings Limited (ADR) (NYSE:WH), through a press release, announced the latest development on the status of the disposal of two of its subsidiaries. The company announced the disposal of Mengfeng and Liaoyang Seamless.
In the latest update, WH said that it disposed all of its equity interest in Mengfeng for a small cash consideration. It offered to sale the business to three third parties of unrelated backgrounds. That followed the string of agreements that it entered into last December.
Loss transaction
In the nominal cash deal for Mengfeng, the company stated in the press release that it will incur loss of about $39 million and that loss is expected to impact its financial results. Nonetheless, the company will be able to save future losses and even dire financial challenges which would be inevitable if it chose to stick with Mengfeng.
The Mengfeng facility was acquired in 2008 with the intension of supply raw materials. But coming on to the second half of 2011, operations at Mengfeng were stopped as the business could not provide low cost raw materials as was intended. The Mengfeng business had also become a big financial burden WSP Holdings Limited (ADR) (NYSE:WH).
In the disposal agreement, WSP Holdings Limited (ADR) (NYSE:WH) was to receive total payment of RMB170 million in two installments. However, the company updated that a significant portion of that money has not been received at the time of sending out the press release.
What about Liaoyang Seamless?
Liaoyang Seamless is the second subsidiary that WSP Holdings Limited (ADR) (NYSE:WH) decided to dispose. The business was offered for sale to two buyers of unrelated backgrounds as part of the agreements entered in December 2013. The sale transaction was to fetch a nominal cash consideration that would in turn leave WH with loss of about $23 million. Coming to decide on the disposal of Liaoyang Seamless was based on the fact that the business was no longer profitable.
The disposal of Liaoyang Seamless involved the buyer paying RMB50 million and assuming RMB40 million in bank loan held by WH. The company updated that the transaction amount for Liaoyang Seamless will be due soon.
The process so far
WSP Holdings Limited (ADR) (NYSE:WH) stated in the press release that the process of completing the transactions require considerable amount of time, although they are in various advanced-stages at present.
