China Evergrande diversifies into vehicle, energy businesses as Beijing continues clampdown on property market
Big property developer to pay US$2.1 billion for 40.96 per cent of Guanghui Group, making it the second-largest shareholder.
China Evergrande Group, the country’s third-largest property developer by sales, is taking steps to diversify into vehicle sales, energy, real estate and logistics, as Beijing steps up efforts to dampen the runaway property market.
Over the weekend, China Evergrande said it will spend 14.49 billion yuan (US$2.1 billion) to buy 40.96 per cent of Guanghui Group. That will make it the second-largest shareholder of the energy-to-vehicles conglomerate.
“In order to promote better corporate development, the Group will commence full strategic cooperation with Guanghui Group to promote the Company’s development in the areas of vehicle sales, energy, real estate and logistics,” said Evergrande’s Chairman Hui Ka Yan in a filing to the Hong Kong stock exchange.
The deal in made up of two parts: Controlling shareholders of Xinjiang Guanghui will transfer 23.865 per cent interest in Guanghui Group to Evergrande for 6.68 billion yuan. And Evergrande will contribute additional capital totalling 7.81 billion yuan to Guanghui Group.
Guanghui Group is engaged in energy, vehicle sales, logistics and real estate businesses in China and elsewhere.
Its net profits before taxes rose 24 per cent in 2017 from a year earlier to 5.92 billion yuan. Its net asset value after deducting certain businesses to be divested, was 26.964 billion yuan as of June 30.
The step was seen as reflecting the ongoing clampdown on runaway prices in the property sector.
In a communique last month after the Communist Party Politburo meeting, Chinese authorities said they remained committed to curbing home price increases.
Shenzhen was the latest Chinese city to take aim at speculation blamed for part of the rise in home prices. It prohibited property owners from selling their flats in the first three years after purchase, banned purchases by companies and organisations to plug a loophole allowing them to skirt current restrictions, and tightened loan polices for those who have been divorced for fewer than two years amid a growing number of people using divorce as a way to secure more loans.
China Evergrande dropped 3.6 per cent to HK$25.80 on Monday, leaving it down about 18 per cent from its January peak. Among other Chinese developers, Sunac China Holdings, fell 4 per cent and China Overseas Land & Investment was down 3.3 per cent.
Hong Kong’s benchmark Hang Seng Index slid 1.6 per cent to 27,499.39 on Monday, putting it near 14-month lows amid risk-off market sentiment fuelled by the US-China trade war.
The mainland stock market was closed for the Mid-Autumn Festival holiday.