Developer Sunac to buy joint venture stakes from Greentown for 15.5 billion yuan

Mainland developer Sunac on Wednesday announced a 15.5 billion yuan (HK$19.4 billion) offer, including 4.2 billion yuan in debt, to take over two 50:50 joint ventures with Greentown China, in a final move to part from its former close working partner.

The final amount will be adjusted with reference to an independent valuation of the 17 property projects involved in the deals, which will be financed with Sunac’s internal resources, the Tianjin-based luxury home builder said in a filing with the Hong Kong stock exchange.

Sunac shares ended the morning session up 2.5 per cent at HK$7.89, while Greentown shares gained 3 per cent to HK$7.70.

“The deal is positive to Sunac,” pushing up its net asset value by 7 to 8 per cent and core profit next year by about 10 per cent, said Nomura property analyst Jeffrey Gao in Hong Kong.

Edison Bian, head of China property research at UOB Kay Hian, said Sunac had sufficient cash to pay for the transactions and he kept the firm as a top pick, maintaining a target price at HK$9.29.

The move follows this month’s collapse of an agreement reached in May for Sunac to buy 24.3 per cent of Greentown’s shares from its founding chairman Song Weiping, his wife, and chief executive Shou Bainian.

Sunac on Monday said it had received HK$6.2 billion yuan from the trio for the principal it had paid and interest accrued. It also issued a five-year senior note earlier this month, raising US$400 million.

In one deal, Sunac plans to pay 6.4 billion yuan, including 725 million in debt, for a mixed-use project in Shanghai and a luxury home project in Suzhou jointly developed with Greentown, which combined had net assets of 2.4 billion yuan at the end of November.

In another deal, Sunac will take over Shanghai Sunac Greentown’s entire stake in a total of 15 projects, with eight in Shanghai, three in Suzhou, two in Wuxi, and one each in Changzhou and Tianjin, for 5.6 billion yuan, including 3.5 billion yuan in debt. These projects are scheduled to be completed in the years up to 2018, except for one that was completed in 2013.