SINGAPORE (Nov 25): Sapphire Corp, which recently exited the steelmaking business in China and made its foray into the mining sector, is now seeking to get involved in railway infrastructure development.

The company will acquire Hong Kong-incorporated Ranken Infrastructure, a China-based engineering, procurement and construction company, for RMB360 million ($75.9 million), it said in a statement this morning.

Ranken is the second-largest privately-owned integrated railway transportation infrastructure group in China, according to Sapphire. Its clients are mainly state-owned enterprises and Fortune-500 companies in China.

Outside China, it is the main contractor and key project consultant for the second-largest railway project in Bangladesh, the Dhaka-Chittagong Railway. It also undertook part of the technical consultancy and civil engineering works for a metro line in India.

Ranken, which has an order book of RMB2.1 billion, generated revenues of RMB346.6 million and earnings of RMB19.4 million for the six months ended June 30.

Sapphire will fund the acquisition using cash, bonds and new shares.

It will issue 165 million shares, about 20.35% of its existing share capital, at 10 cents each to the owners of Ranken.

Sapphire will also provide an interest-free loan of $17.3 million to Ranken and issue about $42.1 million worth of convertible bonds.

The Mainboard-listed company will redeem the bonds if Ranken achieves EBITDA of $16.6 million in 2014 and at least $11.8 million in 1H2015.

On their part, the vendors have pledged to secure at least $50 million in bank loans to support Ranken's working capital.

Ranken will use part of the proceeds to buy a land parcel and a building for its back-office.

"The proposed acquisition, if approved, will transform Sapphire into a value-added land transport infrastructure and engineering specialist following the disposal of the legacy steel business," Sapphire CEO Teh Wing Kwan said in the statement.

"The rail transit and high-speed rail sector has high potential as China and major emerging markets are placing high priority on infrastructure spending to boost domestic consumption and accelerate urbanization."