New World Development

Hong Kong’s New World Development may revive privatisation plan for China property unit

PUBLISHED : Monday, 04 January, 2016, 6:35pm
UPDATED : Monday, 04 January, 2016, 6:35pm

New World Development may revive a privatisation plan for its New World China Land in a HK$16.7 billion deal to buy out the shares it does not own in the mainland property unit.

Shares of New World Development and its 69 per cent-owned New World China Land were suspended from trading on Monday pending an announcement.

Chairman Henry Cheng Kar-shun refused to comment on market speculation. “Optimising the corporate structure is what we have been doing,” he said.

Alfred Lau, a property analyst at Bocom International, said a privatisation for New World China Land would make sense given the grim outlook for the mainland propery market.

“The golden era of the mainland property market is gone. The sector will no longer be a growth story for investors,” he said.

Shares of New World China, which has a market value of HK$53.9 billion, closed at HK$6.21 before they were suspended. Shares of NWD had closed at HK$7.66.

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Lau said New World Development is sitting on a cash reserve of HK$30 billion and should be well placed to launch a privatisation bid again. If it does so, it would be New World Development’s second attempt to take its mainland property arm private.

In 2014, a HK$18.6 billion privatisation bid was rejected by minority shareholders. Since New World China Land is domiciled in the Cayman Islands, the firm has to follow the headcount rule that gives each shareholder an equal vote, irrespective of the size of their shareholding.

In 2014, New World Development’s move was aborted after 494 investors voted against the buyout proposal and 255 in favour of it. The 494 investors represented only a 0.16 per cent interest in the company.

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“It is not easy for the group to secure minority shareholders’ support for the deal unless its offer is very attractive,” said Lau.

Last week, NWD and its controlling shareholder Chow Tai Fook Enterprises announced the sale of five projects on the mainland to Evergrande Real Estate for HK$24.4 billion. It was the second sale to Evergrande in December, following New World China Land’s sale of three projects in Hubei, Guangdong and Hainan provinces for HK$16.36 billion.