China Property

Plans to privatise Wanda Commercial Properties appear to be stalled, in set back for China’s richest man, analysts say

PUBLISHED : Thursday, 19 May, 2016, 9:51pm
UPDATED : Thursday, 19 May, 2016, 11:28pm

A push by China’s richest man Wang Jianlin to delist his flagship property company, Dalian Wanda Commercial Properties, from the Hong Kong stock exchange has run into resistance, as analysts criticise the deal as being unfair to some stakeholders, while mainland regulators raise policy barriers in a sign they are less receptive to the relisting trend.

The announcement of the privatisation plan has been deferred unofficially on a number of occasions.

Wanda Commercial’s Hong Kong shares have been suspended since April 25, pending disclosure of the price and timetable of its potential general offer.

Just how much is China’s richest man willing to pay to delist Wanda Commercial from Hong Kong?

“Wanda may need to reconsider the whole plan as the premise that the company can list in the A-shares by 2018 is changed,” said Raymond Cheng, a property analyst at CIMB Securities, citing heightened scrutiny by China stock regulators amid a rise of Chinese companies flocking back to mainland capital markets.

Cheng said it was more realistic for companies to shelve the relisting plan if the horizon for the IPO was pushed out beyond a reasonable time horizon owing to the heavy financing costs.

Wanda Commecial in March said it plans to buy back its Hong Kong-listed shares at a price not less than HK$48 a share, a deal would require more than HK$30 billion in financing.

Wanda Group has reportedly guaranteed an up to 12 per cent annual returns for investors willing to fund the general offer.

Analysts also raised concerns about claims of the “large room for arbitrage” Wanda has said would accrue to investors from a shift to a mainland exchange.

Wanda Commercial shares surge 18 per cent after it proposes privatisation

Deutsche Bank analysts wrote in a report last week that they “do not see meaningful valuations advantages for big property names in the A-share market over the H-share market.”

The analysts said they had assessed the relative valuations of mainland-listed Poly Real Estate and CSCEC in coming to their conclusion.

Some investors had expressed doubts that about the risks and potential returns in the offer to finance the privatisation.

“Investors in the privatisation deal will be allowed to cash out their equity only after a certain period following Wanda’s successful IPO on the A-share market. We need to consider how much is a fair valuation for Wanda on the A-share market, ” an official with a state-owned bank-backed fund company said.

Deutsche Bank analysts said Wanda’s proposed A-share IPO could be delayed as there are more than 600 IPO applications pending approval. They believe capital invested in the company could be tied up for three to four years.

The final pricing is also a big concern for Wanda.

Wanda is considering an offer price of HK$52.8 per share, or 10 per cent higher than its December 2014 IPO price of HK$48, a property analyst who does not want to be named, said.

“A 10 per cent premium is acceptable by the group as that’s what it promised to investors for funding. But, it would be very hard to get shareholders’ approval as a general buyout offer usually entail a 20 per cent markup,” the analyst said.

Wanda Commercial’s shares were last quoted at HK$51.25 before trading was halted.

If the buyout price is too expensive, long term investors are likely to protest, said another property analyst.

“The deal can hardly be completed. The way Wanda management has done it [structured the deal] has made it very hard to balance all stakeholder’s interest,” the analyst said.

An announcement on the general offer had been scheduled for April 25. A company official said the deal is undergoing assessment by the Securities and Futures Commission.

“The privatisation is still under process, now is a critical period,” the official said, adding that the details of the buyout are likely to announce next week.