Garmin Group Holding (01271) has announced that on 18 September 2026, the sellers, both indirect wholly-owned subsidiaries of the company, entered into agreements with a buyer. Under these agreements, the sellers have conditionally agreed to sell, and the buyer has conditionally agreed to purchase, the properties at a minimum total consideration of HK$2.179 billion, with the potential for additional payments of up to HK$266 million, bringing the maximum total consideration to HK$2.445 billion.
The properties in question are data centre development projects held for leasing purposes. The first two phases of Property 1 were delivered to the buyer, who is the current occupant, in December 2025 and have commenced generating rental income. However, the remaining development and fitting-out works are still underway. Property 2 is currently under construction and is intended for use as a data centre, yet it is not generating any rental income at present.
The board is currently implementing all feasible strategies to lower the group's balance sheet leverage, boost its working capital, and solidify its long-term financial stability. The divestiture offers the group an opportunity to sell both properties as a package to a single buyer and realise substantial cash proceeds, thereby strengthening its financial position while reducing overall debt and lowering financing costs and development risks associated with these properties, subject to the ongoing obligations under the agreements.
Since June 2025, the group has been seeking potential sale transactions and has engaged in various non-binding processes with different parties, though no formal agreements were reached. Now, the buyer has agreed to acquire the properties under these agreements. Even though the two deliveries are not conditional upon each other, transacting with a single buyer reduces the time required to identify and negotiate with different purchasers, minimises execution risks and duplicate costs, and allows for coordinated due diligence, lender consents, repayments, and release of security.
The payment structure permits each property to be transferred upon its delivery with the minimum total consideration paid, while the portion of consideration attributable to specific remaining works is only payable once post-delivery conditions are fulfilled. Consequently, this structure allows the sale to proceed before such works are completed, and the board can assess the merits of the divestiture without relying on the receipt of further additional payments.
The board considered selling the properties separately or bundling the sale with two other properties of the company. However, taking into account that both properties are situated in close proximity and are technically designed to operate jointly, and that the buyer is the current occupant of Property 1, whose consent is required for any sale of Property 1 to a third party, it was determined that the terms, timing, and certainty of execution under this structure are more suitable and feasible to meet the group's funding requirements.
The board has evaluated the divestiture assuming no further additional payments will be received, including a discount of approximately 19.0% on the minimum total consideration relative to the initial valuation at completion status, and an expected accounting loss of HK$1.088 billion. This loss primarily reflects the sale proceeds being lower than the historical book value, which in itself is not a standalone cash payment at the time of delivery.
The board has weighed this loss against the immediate application of net cash proceeds to reduce debt, the financing costs and execution risks of delaying the sale, and the costs and risks of continuing to hold the properties. The expected annual financing cost savings from the planned repayments amount to approximately HK$136 million. The group's remaining works, transition arrangements, and other obligations mainly consist of specific fitting-out works as stipulated under the agreements.
The estimated total cost for the specific fitting-out works and specific construction works under the agreements is approximately HK$118 million, of which about HK$72.5 million remains payable by the group to complete these works and satisfy the relevant post-completion conditions. The estimated total cost is determined with reference to the amounts remaining payable under the relevant subcontract agreements entered into to complete the specific fitting-out works under the agreements.
After considering the aforementioned matters, the results of the buyer identification process, available alternatives, and the financing and security release arrangements described above, the board believes that even without receiving further additional payments, the benefits of the divestiture outweigh the expected accounting loss and retained obligations.