HONG KONG: Shares of Chinese Estates Holdings, a former majority shareholder of struggling developer China Evergrande, jumped 32% on Thursday after announcing a privatization offer for HK $ 1.91 billion ($ 245 million).
The Hong Kong promoter said on Wednesday that the family of Chinese Estates’ largest shareholder, Joseph Lau, had offered to privatize it by offering minority shareholders a 38% premium over its last negotiated price.
The offer represents the latest move by Lau and China Estates to emerge from the shadow of Evergrande, which is floundering with massive debt and threatening the future of Hong Kong society.
Formerly the second largest shareholder of Evergrande, Chinese Estates has already reduced its stake in recent months to 4.39% from 6.48%. He announced a target for the full exit of the holding company and estimates a loss of HK $ 10.41 billion for the current year from the divestiture of the stake.
Eugene Law, director of business development for China Galaxy International Financial, said that as a listed company, Chinese Estates should continue to keep abreast of its position in Evergrande and that “it doesn’t want any problems.”
Once China’s best-selling real estate group, Evergrande faces one of the country’s biggest defaults as it grapples with more than $ 300 billion in debt. His fate is also disrupting global markets, which are wary of the fallout from the overthrow of one of China’s biggest borrowers.
Chinese Estates shares reached HKUS $ 3.81 at noon. They resumed their activities Thursday after being suspended on September 29.
The Hong Kong developer’s shares are down 42% this year before trading was suspended, driven by unrealized losses on its investment in Evergrande, whose stock was hit due to the liquidity crunch and downside risks. fault.
In a statement released Wednesday night, Chinese Estates said its stock price could be further affected by Evergrande as it is “cautious and concerned” about the Chinese developer’s recent developments.
A delisting would reduce costs and management resources to maintain listing status, Chinese Estates added, and could provide more flexibility to implement long-term business strategies.
Besides Evergrande, Chinese Estates said they also have significant investments in another Chinese developer, Kaisa Group, whose shares have also suffered declines in recent months due to broader liquidity concerns regarding the Chinese real estate sector.
Former Chinese Estates Chairman Lau has been a key supporter of Evergrande Chairman Hui Ka Yan and is a member of the so-called Hong Kong Tycoon “Poker Club” which includes Hui.
Lau, whose family owns around 75% of the equity in Chinese Estates, resigned as chief executive officer in 2014 after being convicted of bribery and money laundering in the Macau gaming hub.
(US $ 1 = 7.7857 Hong Kong dollars)
(Reporting by Clare Jim and Donny Kwok; Editing by Anne Marie Roantree and Muralikumar Anantharaman)