Hong Kong-listed property management firm Sunac Services Holding Ltd. has reached a deal to buy nearly a third of a linked par from a developer who recently missed the payment deadline on a $ 250 million bond. of dollars.
In the Monday filing, Sunac Services announced that it has offered to buy more than 322 million Hong Kong listed shares First Service Holding Ltd., 32.22% of the company’s total outstanding shares, priced at 693 million yuan ($ 108 million).
The cash offer of HK $ 2.6167 per share represents a 91% premium to the closing price of First Service shares at the close of trading on October 7. The record says the two sides reached share transfer agreements that day, but the deal is still subject to due diligence, regulatory approval and other conditions.
Sunac Services also plans to buy the remaining shares of First Services and make it a wholly owned subsidiary, according to the announcement.
First Service shares the same controllers as the Beijing-based developer Modern Earth (China) Co. Ltd., who missed a payment deadline last week. Modern Land Chairman Zhang Lei and Chairman Zhang Peng together own over 57% of First Service.
Chinese developers are in the face of plummeting sales and rapid access to financing, as regulators strive to deleverage the sector and the liquidity crisis at Chinese giant Evergrande is fueling concerns about the industry among investors and homebuyers.
Chinese borrowers have defaulted on at least $ 8.7 billion in offshore bonds this year, with the real estate sector accounting for a third of that amount, according to Bloomberg calculations.
With over 50 million square meters of floor space in mainland China under management at the time, First Service was listed in Hong Kong in October 2020. However, its stock price trended down the most. since. It jumped 58% and closed at HK $ 2.16 after Sunac’s offer was made on Monday, still well below Sunac Services’ offer of HK $ 2.6 per share.
With the acquisition, Sunac Services says it hopes to acquire “core competence and a competitive advantage” in green construction, including services such as consulting on environmentally friendly technologies. First Service was one of the first Chinese property management companies to market such services, according to the Sunac file.
Below Action plan (link in Chinese) The Ministry of Housing and Urban-Rural Development released last year, 70% of new urban buildings are expected to be “green” by 2022.
Cover article: How the Chinese housing market landed in the cold
In recent years, several Chinese real estate companies have split of their property management units, helping them reduce their generally high debt levels. Several Hong Kong-listed developers, including Fantasia Holdings Group Co. Ltd., Sichuan Languang Development Co. Ltd., Guangzhou R&F Properties Co. Ltd., as well as ailing China Evergrande Group, have divested their property management businesses.
Sunac Services was a wholly owned subsidiary of Sunac China Holdings Ltd., the fourth-largest real estate developer in the country by sales, ahead of its initial public offering in Hong Kong last year. Sunac China currently owns over 69% of Sunac Services, which fell 0.63% to close at HK $ 15.62 on Monday.
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