Fosun Group

Shares of China’s Fosun rise after deal to sell 26 firms to affiliate

The conglomerate says the all-share transaction will unlock value and allow it to better allocate resources and plan strategy

PUBLISHED : Wednesday, 22 November, 2017, 7:34am
UPDATED : Wednesday, 22 November, 2017, 7:33am

Shares of Chinese conglomerate Fosun International rose on Tuesday after it said it would sell its stakes in 26 companies, mainly property development and management firms, to affiliate Shanghai Yuyuan for 24.23 billion yuan (US$3.65 billion) in an amended, all-share transaction it said was aimed at better allocating resources.

Fosun closed up 6.81 per cent at HK$18.20 in Hong Kong on Tuesday. The benchmark Hang Seng Index gained 1.91 per cent to 29,818. In Shanghai, shares of Shanghai Yuyuan gained 0.65 per cent to 10.86 yuan, outperforming the benchmark Shanghai Composite Index’s 0.53 per cent rise to 3,410.5.

Fosun had said on May 25 that it would sell 28 companies to Shanghai Yuyuan for 24.16 billion yuan, but in a statement late on Monday it said it had decided to terminate that agreement as construction at property projects run by two of the companies was delayed and faced considerable uncertainties.

Shanghai Yuyuan will settle the deal by issuing shares at 9.98 yuan each, boosting Fosun’s stake in it to 69.73 per cent from 26.45 per cent, Fosun said in the Monday statement.

“Fosun is a family-focused company with investments and operations in the health, happiness and wealth sectors and this milestone transaction unlocks significant value for both Yuyuan and Fosun shareholders,” said Guo Guangchang, chairman of Fosun International, in a separate statement on Tuesday.

“Completion of the transaction will enlarge Yuyuan’s asset base and strengthen its financial capabilities,” said Guo. “Furthermore, Yuyuan will leverage the One Fosun platform to rationalise its development strategy, attract top talent and enhance corporate governance.”

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The transaction is pending approval from shareholders of Yuyuan, China’s market regulator the China Securities Regulatory Commission, and other regulatory bodies.

Yuyuan will hold a shareholders’ meeting on December 6 to vote on the transaction, the company said in a separate filing to the Shanghai Stock Exchange on Tuesday. Yuyuan’s assets and liabilities will also be consolidated into Fosun’s financial statements once the transaction is completed.