The Automotive Holdings Group Limited (ASX: AHG) share price was up by 7 per cent on Thursday as the company announced it has entered into an agreement to sell its refrigeration businesses to a Chinese buyer.
Automotive Holdings plans to sell its refrigerated logistics business, consisting of the operations of Rand Transport Refrigerated Logistics, Harris Refrigerated, Scott's Refrigerated Freightways Pty Ltd, and JAT Refrigerated Road Services, to CC Logistics (Australia) Pty Ltd, a wholly-owned subsidiary of Chinese company HNA Holding Group Co Ltd (HKG: 0521), for an enterprise value of $400 million.
The $400 million is to comprise approximately $280 million in cash and the assumption by HNA of approximately $120 million in finance lease liabilities associated with Automotive Holdings' refrigeration business, according to Automotive Holdings.
Although numerous media outlets, including Fairfax Media Limited (ASX: FXJ) and News Corp (ASX: NWS), have suggested that Automotive Holdings' refrigeration business has already been sold, that is not entirely correct.
The parties have entered a binding agreement but the deal is still subject to regulatory approval and "other customary conditions" with completion of the transaction expected to occur in the first half of 2018, according to Automotive Holdings.
As such, AHG would be eligible to receive a break fee in circumstances where the agreement is terminated due to Hong Kong listed HNA failing to obtain any necessary regulatory approvals.
Conversely, AHG would be liable to pay the break fee in certain circumstances.
Automotive Holdings CEO John McConnell said HNA has "indicated a commitment to growing and continuing to invest in the refrigerated logistics sector", both internationally and in Australia.
"As an experienced participant in the logistics sector, HNA will continue to deliver quality services to customers and we strongly believe that the business will have a very positive future under its new owners," Mr McConnell said.
Automotive Holdings Chairman David Griffiths said that while the company's restructuring initiatives are delivering a significantly improved financial performance, "the sale provides AHG with the opportunity to realise a certain value for shareholders that reflects this continuing improvement".
"The sale also provides AHG with both the resources for further growth in our automotive operations and scope for capital management," Mr Griffiths said.
Stephen Cleary, the current CEO of AHG Logistics, will remain with the Refrigerated Logistics business as CEO and will be supported by the existing management team and employees of the business, according to Automotive Holdings.
Automotive Holdings is due to hold its AGM later today.
