China Evergrande’s Shenzhen spin-off plan gets nod from Hong Kong regulator
China Evergrande Group’s proposed spin-off of its key real estate business via a back-door listing in Shenzhen has been approved by the Hong Kong stock exchange, the company said.
Evergrande, the country’s largest homebuilder by sales, has been wanting to transfer its real estate business from a Hong Kong stock market listing to Shenzhen in order to achieve higher valuations.
The company received from the Hong Kong bourse “in-principle approval” for the proposed spin-off, Evergrande said in a stock exchange filing on Wednesday.
In October last year, Evergrande said it planned to inject its assets in Hengda Real Estate into Shenzhen Special Economic Zone Real Estate & Properties (Shenzhen Real Estate) in return for shares, which would see Evergrande’s Kailong Real Estate unit become the controlling shareholder of Shenzhen-listed Shenzhen Real Estate.
Upon completion of the deal, Hengda Real Estate will remain a subsidiary of Evergrande and the Hong Kong-listed Evergrande “will hold the tourism related development, finance and internet businesses with good development potential”, Evergrande chairman Hui Ka-yan said in the statement.
Earlier this month, Evergrande found eight strategic investors for the Shenzhen listing, which values Evergrande’s core real estate business at 228 billion yuan, more than four times its current valuation in Hong Kong.
The Guangdong-based developer overtook property giant China Vanke to become the nation’s biggest property developer in 2016 after its full-year contracted sales reached a record 373.3 billion yuan.
Evergrande’s Hong Kong shares dropped 1.1 per cent to HK$5.33 as of 11:34am on Wednesday.