Here is why tycoon Robert Kuok wants to delist SCMP Group and take it back: the publisher owns part of TV City, a jumble of old, disused buildings in Sai Kung which could be turned into a luxury residential development.
Kuok is a step closer to co-developing the property, a hidden jewel in the publisher’s crown.
And as it turns out, Kuok has an even bigger incentive to take the publisher private after the Hong Kong Economic Journal reported over the weekend that TVB owner Charles Chan has sold Shaw Brothers studio, which is part of the TV City complex, to Fosun International, a Shanghai-based conglomerate.
The price tag was reported to be HK$1.5 billion, a figure Chan declined to confirm and which Fosun described as not subject to disclosure.
Shaw Brothers and SCMP have applied to co-develop the site into a 750-unit low-rise luxury residential project called Clear Water Bay Studio. Shaw Brothers owns slightly more than half of the studio site, SCMP Group the rest.
Assuming the reported HK$1.5 billion acquisition price is accurate, the Fosun deal values the entire 630,000 square foot site at HK$2,381 per square foot. Land premium could come in at HK$8,000 per square foot, or another HK$5 billion.
The deal came barely a week after SCMP Group proposed a contentious share buyback which pitted two of the publisher’s main shareholders — Kuok’s Kerry Media flagship, which has a controlling stake, and Britain’s Silchester International Investors fund, which owns 14 percent of the company. Silchester held out. The stock has been suspended from trading for the past 16 months due to insufficient float.
Kuok acquired part of TV City when he launched a hostile bid for Shaw Brothers’ TVE in 1996. But since TVB moved its headquarters to Tseung Kwan O in 2005, the site has been idle.
In the past decade SCMP has repeatedly tried to win Town Planning Board approval to build a luxury residential project on the site to no avail. All that time, the value of the land has surged on the back of a property boom.
At the same time’s Kuok’s discussions with Sir Run Run Shaw and later Chan over a joint venture got nowhere.
Fosun, the mainland conglomerate dubbed “Shanghai’s Hutchison Whampoa” because of its with sprawling business ranging from pharmaceutical to steel and mining, has a close relationship with Kuok, whose Kerry Group was a strategic investor in its initial public offering in 2007.
To build the project in Clear Water Bay, a popular district among expatriates, Fosun will need to fork out at least HK$5 billion for land premium, assuming a rate of HK$8,000 per square foot.
SCMP faced a similar problem in its repeated attempts to redevelop its side of the property: it did not have the money. The land premium alone would have cost HK$2 billion.
“We have explored different options to enhance the value of this property… However, the development process is complex in view of the size of the development and the adjacent parcel of different ownership, the Government authorities are processing our application alongside the adjacent plot owners’ application,” SCMP said in its latest annual report.
Now SCMP has a friendly neighbor. If only things were warmer with a defiant investor.
– Contact us at en[email protected]