Hopewell shares shoot up 31 per cent after developer unveils HK$21.26 billion privatisation plan
- Founded by tycoon Gordon Wu Ying-sheung and listed in 1972, Hopewell will be one of the longest listed companies to go private
- The developer has landmark buildings and projects such as Hopewell Centre in Wan Chai and built the Guangzhou-Shenzhen Superhighway
Hopewell Holdings, a major Hong Kong infrastructure and property developer, announced a HK$21.26 billion plan to go private, sending its share price up 32 per cent in Thursday morning trading.
The share price rose to HK$34.9, up 32 per cent from its close on November 30 at HK$26.45 when it suspended trading pending for the announcement. It finished the day at HK$34.55, up 31 per cent from the close on November 30.
That trading level was still below the privatisation price offered at HK$38.8 per share announced by the company in a stock exchange filing late Wednesday night.
The company, chaired and founded by Gordon Wu Ying-sheung, said it plans to spend HK$21.26 billion, or HK$38.8 per share, to buy out all 547.85 million shares of the company to cancel its listing status and turn it private. Citi is the financial adviser for the deal.
Chairman Wu and his family own 36.93 per cent of Hopewell, which first listed on the stock exchange of Hong Kong in August 1972. If it succeeds, it would be one of the longest listed companies in the city to turn private.
The company is known for many landmark projects over the past decades, including the Hopewell Centre in Wan Chai, as well as the Guangzhou-Shenzhen Superhighway and the Western Delta Route.
“The proposal represents an attractive opportunity to realise value at an attractive exit premium for the scheme shareholders,” Wu said in the stock exchange filing.
The HK$38.8 offered price represents a 46.7 per cent premium over its last trading day and a 54.1 per cent premium over its past 60-day average. The offered price is 35.6 per cent of its net asset value per share at HK$60.21 as of the end of September.
When a company moves to go private, the controlling shareholder makes a general offer to all other shareholders to buy their shares. Hong Kong regulation has a high threshold, requiring 90 per cent of shareholders in terms of the value of the shares to accept the offer for the proposed privatisation to go ahead. Many privatisation proposals fail because they cannot reach the 90 per cent level of support.
Ryan Chan, associate director at Eddid Securities and Futures, called the privatisation plan – with its 35.6 per cent discount to its net asset value per share – reasonable but said Hong Kong’s high threshold for shareholder agreement leaves fate of the proposal unclear.
In explaining the plan, Wu cited low liquidity of shares, noting that in the one-year period to the end of November, average daily turnover was only 729,219 shares, representing about 0.08 per cent of its total issued shares.
In addition, the company said it is investing heavily in the project of Hopewell Centre II development, which needs a lot of investment in the years ahead.
“Even if the group successfully shows the success of these developments, the public markets have historically not recognised such performances fairly as evidenced by the shares’ long-term trading discount to net asset value, which is to the disadvantage of the shareholders,” Wu said.
“The proposal affords the scheme shareholders the opportunity to realise their investments in the company after completion of the proposal at an attractive fixed price despite increased market volatility and uncertainty,” Wu said.
Hopewell last month posted a 44 per cent year-on-year decline in core net profit to HK$394 million for the six months to September. It posted lower contributions from tollways, after disposing of its stake in its infrastructure unit, and also had lower home sales.
“Hopewell hasn’t had the market’s focus for a long time as its long term projects may need many years to complete. The share price has been at a deep discount to its net asset value for a long time,” said Chan of Eddid Securities.
“Some investors may be interested in taking the privatisation plan to exit,” he added. “However, the deal would need small shareholders’ approval. And if even a small number of investors say no, the privatisation plan cannot go ahead. As such, it is hard to say if Hopewell will successfully go private.”
Hopewell said it will call for a shareholder meeting for approval.