Evergrande snaps up Shenzhen Investment’s property assets for US$814 million
Evergrande shares hit new all-time high, building on previous gains after Morgan Stanley report on Wednesday
State-owned property developer Shenzhen Investment is selling its interests in several projects in smaller Chinese cities to China Evergrande Group, the country’s second-largest developer by sales, for more than 5.424 billion yuan (US$814 million).
Following the announcement, share prices in both companies rose. Shenzhen Investment, the biggest listed property company owned by the Shenzhen government,, gained 0.8 per cent to end at HK$3.63 (US 46 cents), while Evergrande – chaired by Hui Ka-yan – jumped 2.4 per cent to a new all-time closing high of HK$11.94.
Evergrande soared 17 per cent on Wednesday after Morgan Stanley gave it an overweight rating for the first time, and a target price of HK$12, boosted by the expectation of strong upcoming interim results and its plan to list on the mainland stock market.
Shenzhen Investment expects a net gain after tax of approximately HK$2.912 billion from the deal and plans to use the proceeds for “general corporate purposes”, the company said in an exchange filing.
It will transfer its equity interests in four companies – Sanshui Property, Sanshui Hotel, Pengji Assets Management Company, and Sanshui Investment – to Evergrande for 5.424 billion yuan, plus interest on shareholder’s loans.
“The company has been promoting the disinvestment of the projects in third- and fourth-tier
cities, and the pickup of real estate market in those cities has created a favourable
condition for the disposal,” the filing said, adding the offloads will have a positive impact on the company’s financial position.
Sanshui Property, Sanshui Hotel, and Sanshui Investment together own a project in Sanshui district, Foshan city in southern Guangdong province being developed into “low-density residential and commercial/services”.
Pengji Assets Management owns the “Shanglin Garden” project in Taizhou, in eastern Jiangsu province.