ST Engineering anticipates a one-time gain of $48.1 million following the divestment of its joint venture in Shanghai.
On November 17, the company announced it will sell its 49% stake in Shanghai Technologies Aerospace Company (Starco) to joint venture partner China Eastern Airlines Corporation for $124.6 million.
The sale price values Starco at an EV/EBITDA multiple of 11.2x, based on its fiscal year 2024 financials.
From the net proceeds of approximately $116.3 million, ST Engineering plans to repay debt, estimating annual interest savings of around $4.2 million.
Starco contributed $7.5 million in earnings during FY2024.
Over the past year, ST Engineering has executed several divestments, including its US construction machinery division and a Singapore broadband joint venture.
Established in 2004, the Starco joint venture provided airframe maintenance, repair, and overhaul (MRO) services from facilities in Shanghai's Hongqiao and Pudong districts.
The original 20-year joint venture agreement expired last year, prompting the partners to dissolve the arrangement.
"ST Engineering values its strong partnership with China Eastern Airlines and looks forward to continuing support as a valued customer," the company stated.
ST Engineering noted its expanding MRO footprint in China, with established operations in Guangzhou and Xiamen, plus a recently opened facility in Ezhou, Hubei province.
"These strategically positioned facilities enable the business to capitalize on growing MRO demand across China and the broader region," the company commented.
"The ongoing optimization of MRO facilities, combined with newer, more modern operations, improves efficiency and enhances the group's global MRO competitiveness."
"Even after accounting for the Starco divestment and current expansion projects in Singapore, China, and the US, our total capacity exceeds pre-pandemic levels, ensuring continued ability to meet customer demand," ST Engineering added.
ST Engineering shares closed at $8.49 on November 14, marking a 2.19% daily decline but an 82.58% year-to-date gain.