Sunac China Holdings Ltd. (01918.HK), a mainland property developer founded by chairman Sun Hongbin, plans to acquire up to 30 percent of Greentown China Holdings Ltd. (03900.HK), the Hong Kong Economic Journal reported Friday, citing a stock exchange filing.
Sunac, which is much smaller than its target in terms of property sales and market capitalization, is in talks with Greentown chairman Song Weiping and other substantial shareholders about the potential acquisition, the filing said without indicating any price range. The stocks of the two companies will resume trading Friday.
Based on Greentown’s last trading price at HK$7.81 per share and the size of its issued capital, a 30 percent stake is worth HK$5 billion.
Market analysts said the deal would send Sunac’s gearing ratio to an even higher level. The acquisition may also be ill-timed, given the gloomy outlook of the property market, they said.
Other substantial shareholders considering selling their stakes in Greentown include Song’s wife Xia Yibo and chief executive Shou Bainian. The three parties hold a combined 42.9 percent stake in the company.
Song is expected to keep part of his holdings but will resign from the board after the deal, according to the newspaper. Wharf (Holdings) Ltd. (00004.HK), the second biggest shareholder, may become the largest if it fully exercises Greentown’s convertible bonds to raise its stake to 35 percent from 24.32 percent as of the end of last year. The bonds were issued when Wharf bought into Greentown in 2012.
Sunac is purportedly seeking financing from the Hongkong and Shanghai Banking Corp. Ltd., the report said. Taking a potential premium into account, Deutsche Bank AG expects the deal will be valued at about HK$7 billion, adding 40 percentage points to Sunac’s gearing ratio, which is now at 69.1 percent.
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