Sunac China shares plunge amid talks to buy 30 per cent of Greentown
Developer suffers its biggest drop in three months after an announcement revealing discussions to buy 30 per cent of Greentown
Shares of mainland developer Sunac China suffered their biggest decline in almost three months yesterday but Greentown China soared 11 per cent during the session after the two announced they were in talks for Sunac to buy up to 30 per cent of Greentown in a deal worth at least HK$5 billion.
Sunac shares closed down 6.5 per cent yesterday at HK$3.86, its biggest fall since February 24. Greentown eventually settled up 2.82 per cent at HK$8.03.
Investors are concerned about Sunac's possible capital expenditure and risks arising from the integration.
Tianjin-based luxury-home builder Sunac, in which US buyout firm Bain Capital has a stake, is in discussions to buy shares from Greentown's chairman Song Weiping, Song's wife and chief executive Shou Bainian, according to statements published by the companies on Thursday.
Because of Sunac's strong sales execution and the two developers' close relations in the past two years, some analysts recommended the stock as a "buy".
Sunac’s strong sales execution should continue to provide a liquidity buffer
"It is too soon to determine what extent the acquisition will influence the two companies' credit profiles," global ratings agency Standard & Poor's said yesterday. "We expect [Sunac] to gradually expand its offshore financial channels after the acquisition through closer co-operation with Wharf (Holdings) Ltd, currently Greentown's second-largest shareholder."
