Country Garden Services seeks US$1 billion from stock placement with eyes on acquisition opportunities
- Country Garden Services is placing 173 million shares at HK$45 each, pricing new shares at a 9.4 per cent discount to Thursday’s closing price
- The stock placement follows the issuance of HK$3.84 billion worth of convertible bonds between April and June this year
Country Garden Services Holdings, the property management arm of mainland Chinese developer Country Garden, plans to raise HK$7.78 billion (US$1 billion) from the sale of new shares, which it plans to use to fund potential mergers and acquisitions.
The company is placing 173 million shares at HK$45 each, according to an exchange filing on Friday. The price represents a 9.5 per cent discount to the closing price on Thursday. It appointed China International Capital Corp, JPMorgan Chase and UBS to arrange the placement.
The company’s shares fell by as much as 7.1 per cent in the morning before paring losses to trade 4.5 per cent lower at HK$47.45 after the lunch break. The benchmark Hang Seng Index rose 0.3 per cent.
“In terms of placement by a property management [company], it is probably [the] biggest,” said Lung Siu-fung, an analyst with CCB International Securities. The firm is taking advantage of the liquidity in the market to bulk up its finances for growth opportunities, he added.
Country Garden Services’ shares placement follows the issuance of HK$3.84 billion worth of convertible bonds between April and June this year, most of which have been used for acquisitions, according to the filing. The company’s net cash balance almost doubled to 9.9 billion yuan on June 30 from a year earlier, according to its interim report.
“No one expected them to raise money given its net cash position,” said Raymond Cheng, managing director at CGS-CIMB Securities. “They are aiming for some big mergers and acquisitions.”
While the company said it would closely monitor the business and the market conditions for any such acquisitions or strategic investments, it has not identified any specific target for such acquisitions or strategic investments, and no allocation plan for the net proceeds has been formulated.
“The property management industry is in a golden period of development, and its boundaries and substance are reshaping, with extending service scope, changing service means, improving technical and intelligent development, and accelerating industry consolidation,” according to the filing. “The market shares of leading players will further grow.”
Country Garden Services’ revenues rose 78.4 per cent to 6.3 billion yuan (US$963 million) in the six months to June from a year earlier. Profits grew 61 per cent to 1.3 billion yuan.
As of end June, the company had a gross floor area of 745.8 million square metres under contract, an increase of 61.1 million square metres from a year ago.
