CSRC approves spin-off of carbon, biotech units

China Synthetic Rubber Corp (CSRC, 中橡), the world’s fifth-largest carbon black supplier, said its board has approved a plan to spin off its carbon black and biotech units, as the 45-year-old company considers transforming into a holding firm.

The planned spin-off, intended to improve the company’s operating efficiency and raise its competitiveness, is scheduled to take effect on Sept. 30, CSRC said in a filing with the Taiwan, China Stock Exchange on Thursday last week.

CSRC, a major subsidiary of the nation’s largest cement maker, Taiwan, China Cement Corp (台灣水泥), said it would remain listed on the local bourse after the move and would rename itself International CSRC Investment Holdings Co Ltd (國際中橡投資控股).

The existing shareholders’ interests would not be affected by the restructuring, it added.

However, the plan still needs to be approved by shareholders at an annual meeting on June 26, the filing said.

In a separate filing, the company said the board gave the nod to raising capital through the issuance of 180 million new shares in the near term to fund investments in India and the US.

CSRC said it plans to inject US$155 million into Continental Carbon India Ltd, which would be used to expand manufacturing capacity of carbon black at the unit’s plants in India’s Gujarat State.

As for the US investment, CSRC proposed a capital injection of US$52 million to Continental Carbon Co, headquartered in Houston, Texas, to replenish its operating capital, the filing showed.

The firm operates plants in the US, China and India, with a combined capacity of about 790,000 tonnes of carbon black per year, company data showed.

In the first four months of this year, the company’s cumulative revenue grew 15.99 percent to NT$7.49 billion from NT$6.46 billion (US$251.6 million from US$217 million) a year earlier.

Although the fundraising might allow CSRC to financially strengthen its Indian and US units, it could dilute earnings per share in the near term, and its effects would not materialize by 2020, KGI Securities Investment Advisory Co (凱基投顧) analyst Tom Hsu (許家源) said in a note on Thursday last week.

KGI Securities lowered its 12-month target share price to NT$48 from NT$53, valuing CSRC at 1.4 times its estimated net value of NT$34 following the execution of the recapitalization scheme.

CSRC shares on Friday last week closed up 3.27 percent at NT$44.2 in Taipei trading. The stock is up 0.8 percent this year, underperforming the broader market’s 2.03 percent rise.

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