Chinese port operator Cosco Pacific Ltd. (1199.HK) said Monday it has agreed to sell its entire 21.8% stake in container maker China International Marine Containers (Group) Co. (2039.HK) to its state-owned parent company for $1.22 billion in cash.

Cosco Pacific said in a statement the sale of its CIMC stake to China Ocean Shipping (Group) Co. will generate substantial cash flow for the blue-chip company to expand its container leasing operations, as well as make new acquisitions in its core terminals business.

The stake sale comes as shipping operator Cosco Holdings Ltd. (>> China COSCO Holdings Company Limited), which owns 42.7% of Cosco Pacific, struggles to improve its profitability after reporting two straight years of net losses. Analysts have said that a possible CIMC sale by Cosco Pacific could help Cosco Holdings prevent another year in the red.

CIMC is the world's biggest container maker by output, and is also 25.5%-owned by Cosco Pacific's rival China Merchants Holdings (International) Co.

A protracted shipping downturn has weighed on global demand for container boxes. CIMC has struggled to boost sales, with its net profit tumbling 42% in the first quarter from a year earlier.

However, the Shenzhen-based company has sought in recent years to diversify into offshore engineering, storage & logistics, as well as energy equipment manufacturing, to help offset the impact of a weak shipping-related business.