- THE MAGAZINE
Global Logistic Properties Limited (GLP), a provider of modern logistics facilities in China, Japan and Brazil, has entered into a landmark agreement with a group of leading Chinese domestic institutions (Strategic Partners). This transaction is expected to substantially increase GLP’s growth, as development pace accelerates on the back of access to strategic land holdings, customer relationships and increased business opportunities with the Strategic Partners.
Strong Domestic Partners Provide Competitive Advantage
The Strategic Partners include a large Chinese insurance company, Bank of China Group Investment Limited (100 percent subsidiary of Bank of China), and HOPU Funds. HOPU Funds is backed by China’s largest state-owned companies and institutional investors.
Mr. Jeffrey H. Schwartz, co-founder and cChairman of the Executive Committee said, “The new partners bring increased access to best-in-class customers and additional capital, establishing a strong platform for future growth. Retaining and incentivizing our market-leading team in China is critical in order to achieve this growth. With this strategic transaction, which includes employee participation, Ming and I believe we will accomplish this.”
Mr. Ming Z. Mei, co-founder and chief executive officer of GLP said, "There is huge potential to improve the efficiency of the logistics industry in China, driven by the critical lack of modern logistics facilities. This strategic partnership takes GLP to the next level, as we seek to strengthen our local presence and solidify our role as the top logistics solution provider in the country. This transaction is expected to substantially increase GLP’s growth as our development pace accelerates to meet the significant opportunities we see in all our markets.”
Key Transaction Terms
The transaction is split into two tranches:
- First tranche of US$1.6 billion
- US$1.48 billion of new shares in GLP’s wholly-owned Chinese subsidiary (China Holdco)
- US$163 million of new shares in GLP’s listed entity (GLP Listco”, representing 1.5 percent of GLP Listco’s shares outstanding, at a price of S$2.755, a 3 percent discount to the volume weighted-average trading price over the last 30 days
- Second tranche of up to US$875 million of new shares in China Holdco
In total, the Strategic Partners, with participation by GLP employees and its management team, could invest up to a 34.0 percent stake in China Holdco. The price of the new China Holdco shares will be fixed on the basis of the net book value of the consolidated business and its subsidiaries and the investment is subject to a three-year lock up period. Citigroup Global Markets Singapore Pte. Ltd. has been appointed by the Board of Directors of GLP to advise on the fairness of the financial terms of the shares to be issued in China Holdco.
This transaction is subject to regulatory and GLP shareholder approval. A circular containing further details will be issued in due course to convene an extraordinary general meeting for this purpose.
GLP intends to use the majority of the proceeds to strengthen and further develop its network in China. GLP estimates the market opportunity in China to be valued in excess of US$2.5 trillion and in November 2013 launched a US$3 billion China logistics infrastructure fund to develop modern logistics facilities in China. Eighty-six percent of the capital has already been allocated for CLF Fund I; the agreement will provide additional capital to further capitalize on the significant growth opportunity in China.
Mr. Fang Fenglei, founding partner and chairman of HOPU Investments Co., Ltd said, “GLP has an unrivalled market presence, the most experienced team and a proven track record in execution. We are very pleased to team up with a large Chinese insurance company and Bank of China Group Investment Limited to organize the consortium in the next phase of their growth. Continuing urbanization and the proliferation of e-commerce is fueling demand for logistics space in China. With its strong market presence and extensive network, GLP is well-positioned to meet the growing logistic needs of state-owned enterprises such as COFCO and China Railway Group. We look forward to facilitating further strategic cooperation.”
In connection with closing on the transaction, the Board of GLP intends to appoint Fang Fenglei as an additional director.
Compelling Growth Opportunities; Strengthen China Platform
Today, logistics expenditure makes up 18 percent of China’s GDP, twice as high as developed countries such as the U.S. and Japan. The demand of China’s continuing urbanization and rising domestic consumption is not being adequately met by the logistics infrastructure in the country. Furthermore, businesses must meet the challenge of optimizing efficiency in order to reduce operating costs, even as they expand their distribution networks. Through its network of strategically-located properties and experienced team, GLP is able to offer both space and integrated solutions to drive value for its customers.
GLP has built a business of unrivaled scale and breadth in China. Its portfolio has grown at a 67 percent compound annual growth rate since FY2005, and today encompasses 8.7 million square meters (93 million square feet) of completed facilities. This transaction will build upon the company’s market-leading position and allow GLP to accelerate the development and leasing of high-quality facilities that will transform China’s distribution and logistics system.