Hersing Trims Profit-Sharing Rights In Unit

Source : The Business Times, October 12, 2007

US$18m proceeds to be invested in other operations, including self-storage business

THE Western Union Company has agreed to acquire 49 per cent of the profit-sharing rights in Western Union Global Network Pte Ltd (WUGN) from listed real estate player Hersing Corporation for US$18.33 million.

Hersing said yesterday it will use the proceeds to expand its other operations, including its fast-growing self-storage business.

Hersing entered into a joint venture with Western Union in 2001 to form WUGN to offer money transfer services in Singapore.

Under that agreement, Hersing owned 255,000 Class A ordinary shares and Western Union held 245,000 Class B ordinary shares, representing 51 per cent and 49 per cent of WUGN respectively.

Hersing's Class A shares had all the rights of ordinary shares, including the right to any profit distribution or dividends from the joint venture.

Western Union's Class B shares had all the rights of ordinary shares except for the right to distribution of any profits or dividends.

Effectively, the Class A shares gave Hersing the benefit of 100 per cent of its economic interest in WUGN.

Now, Hersing and Western Union have entered into a new arrangement, effective Jan 1, 2008. Under this, the Class B shares of WUGN will be converted to shares that will rank equally with the Class A shares. This will reduce Hersing's right to any profit distribution or dividend declaration to 51 per cent.

'The purpose of the proposed transaction is to enable Western Union to participate in the financial results of WUGN in proportion with its 49 per cent shareholding,' Hersing said in a statement.

Hersing will realise a significant capital gain and improve its cash flow. The cash obtained from the divestment will 'enable the company to exploit any opportunity, should one arise, to expand the group's businesses', it said.

Hersing said yesterday it plans to aggressively expand its Storhub self-storage operations in key Asian cities in the next three years.

In Singapore, the group has three Storhubs - at Kallang, Changi and Toa Payoh - and will open a fourth by the end of this year. A fifth, at Tampines, is scheduled for completion in the first half of 2009.

Hersing says it introduced the self-storage business to Singapore in 2003 and now has more than 2,500 store rooms.

Between 2003 and 2006, Storhub's revenue grew by a compounded annual rate of 62 per cent to $6.2 million.

'Our success in Singapore shows we have grasped the secret of succeeding in the self-storage business,' said Hersing chairman Harry Chua.

'We believe that the group can replicate this success throughout Asia. We believe that with the ever- increasing consumer purchasing power in Asia-Pacific, there will always be a strong demand for offsite storage space, as proved in the US.'