GLP Pte has made about $7 billion worth of assets in China available for state-backed China Logistics Group Ltd. to choose from as due diligence for a potential deal continues, according to people familiar with the matter.
The assets under review come from multiple funds and projects, said the people, who asked not to be identified as the talks are private. Bloomberg News reported in July that a deal could see China Logistics Group take a controlling stake in a portfolio of GLP’s assets in the world’s second largest economy.
No final decision has been made on which assets will be included in the portfolio and hence the ultimate size of the transaction, the people said. A representative for GLP declined to comment, while a representative for China Logistics Group didn’t respond to requests for comment.
Singapore-incorporated GLP has suffered from credit downgrades since last year on concerns over declining earnings, rising debt levels and corporate governance. S&P Global Ratings and Fitch Ratings put the logistics property operator on negative rating watch, threatening its investment-grade status.
GLP told investors in May that it entered into a memorandum of understanding with an unnamed investor on the potential sale of some assets in China. The company said it targets to complete the deal this year and will use the proceeds to reduce leverage and fund debt buybacks among other things. The firm’s GLP China Holdings Ltd. unit said it had a net asset value of around $14 billion at the end of 2022.
The company could be able to keep its high-grade status at least into 2024 if it can sell some of its China assets to China Logistics Group, Bloomberg Intelligence credit analysts Dan Wang and Andrew Chan wrote in a report in July. Using the proceeds to repay near-term maturities might reduce investor concerns about liquidity, they added.
Founded in 2009, the owner and operator of logistics real estate also invests in data centers and renewable energy while benefiting from strong demand for warehouse space driven by China’s e-commerce boom. It operates in 17 countries across Asia, Europe and the Americas. It was acquired in 2018 by a consortium including private equity firms Hillhouse Capital Management and Hopu Investment Management for S$16 billion ($11.8 billion). The deal was Asia’s biggest buyout at that time.
China Logistics Group was formed in late 2021 when Beijing merged five state-owned companies in the sector to create a national logistics powerhouse as part of the country’s push to consolidate state assets. Its businesses include rail transit industry, bulk commodity supply chain services, engineering logistics and cross-border e-commerce logistics.
--With assistance from Andrew Monahan.