In a board meeting today, Continental Holdings Corp. (CHC, TWSE stock symbol 3703) approved a plan authorizing Continental Engineering Corporation (CEC) to divest its wholly-owned subsidiary Hsin Dar Environment Corporation (HEC) and transfer all its shares in HEC to a newly incorporated company. The new company will at the same time issue new shares to CHC and later merge with HEC, paving way for CHC to eventually exert direct ownership over HEC.
To increase competitiveness and enhance financial and operational performance, CHC has decided to restructure by having its 100%-owned subsidiary CEC divest and transfer all its shares in its wholly-owned subsidiary HEC to a new company, Continental Environment Corporation (Continental Environment), which will at the same time issue new shares to CHC. After the spinoff, both Continental Environment and CEC will be wholly-owned subsidiaries of CHC, and as such the rights and benefits of existing CHC shareholders will not be affected. As this is an organizational restructure, the new company’s divested value is estimated at NT$2,212,913,149, based on the book value of CEC as of December 31, 2016. The divested value will be finalized based on the book value as of the day before the transaction date of divestiture, which will take effect on August 1st, 2017.
With the spinoff, Continental Environment will assume all legal rights, obligations associated with HEC’s operations. Afterwards, Continental Environment will, in compliance with the Business Mergers and Acquisitions Act, merge with HEC in the shortest possible time to allow CHC to be the direct shareholder. All matters and operational procedures dealing with the divestiture plan will be handled by the board of CEC in accordance with the law.
Established in 2006, HEC reported revenue of NT$670 million in 2016, accounting for 2.76% of CHC’s consolidated revenue that year. In addition to existing projects, HEC in 2016 won the Chung-Li Area Sewerage System BOT Project (JV with CTCI), Feng-Shan Wastewater Reclamation and Reuse BTO Project (JV with CTCI) and Pu-Ding Sewerage System BOT Project, all of which will continue to provide a steady source of income for CHC. In the future, aside from its wastewater and recycled water businesses, HEC will develop new business in bio-mess energy and solid waste sectors.