Chinese billionaire Wang Jianlin's Dalian Wanda Group Co is offering HK$34.5 billion ($4.4 billion) to buy out its Hong Kong-listed property unit as it seeks a higher valuation for the business on mainland stock exchanges.
Wanda Group will pay HK$52.80 for each Hong Kong-traded share of Dalian Wanda Commercial Properties Co, the company said in a statement on Monday, 10 per cent higher than an earlier offer of at least HK$48 and 3 per cent higher than its last trading price of HK$51.25 before trading was halted 22 April. The shares, which have traded in Hong Kong for less than two years, fell to HK$49.60 at 1:09 pm after resuming trading on Monday.
Wang, who controls Wanda Commercial's Beijing-based parent, told China Central Television on 22 May that the unit is "substantially undervalued" and must proceed with the privatisation. The billionaire has been seeking investors to help purchase as much as 14.41 per cent of the shopping-mall operator and re-list it in mainland China, according to a document sent to prospective backers.
Going-private deals that aim to relocate overseas share listings to Shanghai or Shenzhen have been under the spotlight after China's stock regulator voiced concerns such transactions could flood its market. Wanda's transaction is pending shareholder and regulatory approvals, according to the statement.
In its pitch to investors, Wanda Group cited an average valuation of 29 times estimated full-year earnings for mainland listings, based on four companies engaged in managing free-trade zones and industrial parks. Wanda Commercial was trading at about 6.4 times before trading was halted in April, according to data compiled by Bloomberg.
Wanda Group will proceed with plans to buy out the property unit after considering whether to scrap the deal in the wake of Chinese regulatory concerns, people familiar with the matter had said.
Wang joins a growing number of Chinese tycoons seeking loftier valuations for their companies by moving their listings from Hong Kong or New York. Evergrande Real Estate Group Ltd may consider going private and list in China given its chairman's view that the developer's valuation in Hong Kong is distorted, Citigroup Inc said in an 18 April report. US-listed SouFun Holdings Ltd, China's biggest real estate web portal, is seeking to move its shares to the Shanghai stock exchange via a backdoor listing.
Such deals have drawn regulator scrutiny, with the China Securities Regulator Commission saying in early May it is conducting research on their possible impact.
Regulatory concerns have recently roiled shares of US-traded Chinese companies such as Qihoo 360 Technology Co that have announced privatisation plans.
If Wanda Commercial has not gone public on a mainland exchange by either 31 August, 2018, or two years from the Hong Kong de-listing, Wanda Group will buy back the shares at a level guaranteeing a 12 per cent annual return for domestic investors and 10 per cent for those overseas, according to the document sent to prospective backers, a copy of which was obtained by Bloomberg News. The 14.41 per cent figure Wang is seeking investors for represents the portion of the company not controlled by him and other mainland shareholders.
The proposal promises a "relatively large room for arbitrage" for investors given that the property arm's Hong Kong-listed shares are "seriously undervalued," the company said in the document.
Wanda Group said on 30 March it was considering offering HK$48 or more for the developer's Hong Kong shares, causing the stock to surge as much as 22 per cent the following day.
