CHEMICALS and explosives company AECI Group has sold its Heartland property in Modderfontein, east of Johannesburg, to a Chinese entity for more than R1bn as part of plans to dispose of surplus land holdings.

The transaction took nearly four months to conclude, and will result in Shanghai Zendai Property developing the 1,600ha of land and buildings for mixed use that may include residential, commercial and retail developments, said AECI in a regulatory filling after the close of trading in Johannesburg on Monday.

Shanghai Zendai is an investment company with a market capitalisation of the equivalent of $294m on the Hong Kong Stock Exchange. It develops and manages property projects in 12 cities in northern China, Shanghai city and Hainan province.

AECI stock closed 0.41% higher at R121, giving the chemicals group a market capitalisation of R15.5bn on Monday.

The chemicals and explosives company’s vast property portfolio, on which it used to test commercial explosives, had become surplus to requirements as improvements in explosives technology has meant it needs smaller parcels of land for testing purposes.

It is expected the transaction may be effective next July after all the property transfers have been done. AECI will retain about 1,300ha of land at Modderfontein for its current and future operational requirements.

It may dispose of some of the land in the future, it said.

Shanghai Zendai has also received the first right of refusal to acquire other AECI assets in Modderfontein for the next 10 years.

"In addition, during this period AECI shall not directly compete with Zendai in the business of property development in respect of the remaining assets," said AECI. "The transaction represents a unique opportunity for AECI to realise immediate value for the majority of the surplus land surrounding its operations in Modderfontein in a single transaction," the company said.

No decision has been made as to how the proceeds of the property sale will be deployed.

Alternatives may include returning the cash to shareholders in the form of share buybacks or dividends, said the company.

AECI will retain ownership of the Modderfontein Reserve, a 275ha area zoned as private open space.

The transaction excludes AECI’s land and buildings in the Western Cape and in Umbogintwini, KwaZulu-Natal.

The company will continue to manage these — some of which are already under development for residential, industrial and commercial purposes.