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Chinese Estates offers to privatize the company after selling at a loss its stake in debt-ridden China Evergrande

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Hong Kong mogul Joseph Lau Luen-hung’s family consider taking Chinese real estate holdings private and on Wednesday offered an 83.5% premium for shares held by minority owners.

The family is offering HK $ 4 each to public investors in the Hong Kong-listed company, whose stock closed at HK $ 2.18 on September 28, the last trading day before it was suspended, according to a stock market file. It will shell out a total of HK $ 1.9 billion ($ 244.9 million) for the shares.

Lau’s family currently controls around 78.6% of Chinese Estates and, based on its offer price, values ​​the company at HK $ 7.63 billion.

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The offer to purchase comes after Chinese Estates sold shares of the debt-ridden China Evergrande group.

Evergrande, which is controlled by Chinese billionaire Hui Ka-yin, is the world’s most indebted developer with total liabilities of $ 300 billion and is desperately trying to avoid a potential default.

Chinese Estates said on Wednesday that losses from the sale of China Evergrande shares had exacerbated the company’s fundamentals. Chinese Estates lost HK $ 1.38 billion after selling 108.9 million China Evergrande shares on the open market between August 30 and September 21, according to the filing with the Hong Kong Stock Exchange.

Joseph Lau Luen-hung’s family, right, currently control around 78.6% of Chinese estates. Photo: Felix Wong alt = Joseph Lau Luen-hung’s family, right, currently control around 78.6% of Chinese domains. Photo: Félix Wong

Chinese Estates sold Evergrande’s shares on the open market for HK $ 246.5 million, or HK $ 2.26 each on average. Evergrande stock was changing hands at HK $ 3.42 on average during this period, according to Bloomberg data.

The average sale price in August and September represents an 86 percent discount from its average purchase price.

The company said it expects further losses from its sale of China Evergrande shares and that uncertain business prospects could weigh more heavily on Chinese Estates shares, which have already lost 23% this year. He said the privatization proposal gives its minority owners the opportunity to sell their shares without any additional risk.

“We see that the business environment in which the company operates is difficult and uncertain. The Covid-19 pandemic has continued since early 2020 and shows no signs of significant improvement in the near future. Its social and economic impacts are major and unprecedented, ”says the company.

The divestiture and eventual exit of Chinese Estates is an important moment in his links with the Hui of Evergrande. Chinese Estates has been either a buyer or a seller in all of Evergrande’s material financial transactions since its IPO in November 2009.

Chinese Estates the only key investor in the Evergrande IPO 12 years ago, held 751.09 million Evergrande shares, or 5.66% of the Shenzhen-based developer, as of August 31. He paid HK $ 13.59 billion to complete his stake in Evergrande in 2017 and 2018, picking up a total of 860 million Evergrande shares at an average price of HK $ 15.80 a piece, according to records.

Lau’s family said on Wednesday they would sell more Evergrande shares either through block trades or as part of a series of deals “depending on prevailing market conditions.”

This article was originally published in the South China Morning Post (SCMP), the most authoritative voice on China and Asia for over a century. For more SCMP stories, please explore the SCMP application or visit the SCMP Facebook and Twitter pages. Copyright 2021 South China Morning Post Publishers Ltd. All rights reserved.

Copyright (c) 2021. South China Morning Post Publishers Ltd. All rights reserved.

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