Sun Hongbin, founder of Sunac China Holdings (01918.HK), has a reputation for being an “M&A maniac”, but many of the deals he orchestrated have somehow fallen apart or ended in disaster.
Sun had sought to rescue the debt-laden Leshi, pouring billions of yuan into the ailing operation last year. Later, Leshi founder Jia Yueting fled to the US, leaving behind a mountain of debt.
In another initiative, Sunac agreed to pay 43.8 billion yuan for 13 tourism projects from Chinese commercial property conglomerate Dalian Wanda Group, also last year.
However, it’s reported that the handover of five of those projects is still pending, after repeated postponement.
In 2014, Sunac signed an M&A agreement with Greentown China (03900.HK), following which Sunac had made full payment and taken over the daily management of Greentown.
However, Greentown’s founder Song Weiping changed his mind later. In the end, Sunac only acquired some assets from Greentown, and Song bought back his stake from Sunac at a premium.
In other deals, Sunac offered a bid to buy a stake of troubled Shenzhen developer Kaisa Group and acquire property assets from indebted food maker Yurun in 2015. Sun was forced to drop both deals for some reason.
“There are times one has to admit defeat,” the Chinese property tycoon said in an online investor meeting of Leshi Internet Information & Technology on Tuesday.
Sun may sound disheartened, but the fact is, some of those failures in some way helped pave the way for Sunac to become the fourth largest property developer in China, ranking behind Country Garden, China Evergrande and Vanke.
Meanwhile, its share price has shot up almost ten-fold to nearly HK$40 from below HK$4 in 2015.
Sunac’s rapid rise can be partly attributed to the booming property market. Yet those failed deals also played an important part.
For example, it has bought a number of good projects from Greentown and successfully made inroads into the highly sought-after Hangzhou market.
While not having fully completed the Wanda deal, Sunac has at least bagged 8 projects, and they are expected to boost sales revenue for 2017 and 2018.
More importantly, through all these deals, Sun has built an image as a white knight in China’s property industry. As the property industry undergoes consolidation, smaller, less competitive players may turn to Sunac in the first place if they have plans to sell assets, or sell their companies.
It’s estimated that Sunac added 1.4 trillion yuan worth of land last year, the most in the sector. Roughly 70 percent of the land plots were acquired at rather favorable prices through M&A activities, including many smaller transactions that the market seems to have neglected.
So Sun has actually done quite well despite some high-profile failures.
This article appeared in the Hong Kong Economic Journal on Jan 25
Translation by Julie Zhu
[Chinese version 中文版]
– Contact us at [email protected]