Battle for control looms over Midland amid record loss since listing

Real estate broker receives an offer from a mystery investor to buy a 10pc stake after it posts its biggest loss since listing in 1995

PUBLISHED : Saturday, 29 March, 2014, 1:14am
UPDATED : Saturday, 29 March, 2014, 1:14am

A battle for control looms on the horizon for Midland as a mystery investor offers to buy 10 per cent of the Hong Kong-listed real estate broker on the heels of it posting its biggest loss since listing in 1995.

The company yesterday announced a loss of HK$204.03 million for last year after posting a profit of HK$297.72 million in 2012.

Adding to the storm clouds gathering over the beleaguered company, Apex Benchmark, which has been urging for a change in the family-run management, disclosed on Thursday that it had increased its stake to 9.57 per cent from 7.5 per cent in October last year.

That makes the real estate fund Midland's second-largest shareholder after chairman Freddie Wong Kin-yip, who holds 16.73 per cent.

Late on Thursday, Midland said it had received a letter from a firm of solicitors issued on behalf of an unidentified party seeking to buy 71.8 million new shares, or 10 per cent of the brokerage's issued share capital.

The investor has offered a 10 per cent premium to the average closing price of Midland shares in the five trading days prior to the offer, according to the company's filing to the stock exchange.

Mau Wang-bong, a former Midland employee and an investor in Apex, said the offer did not come from the real estate fund. "We also want to buy more shares in Midland to increase our influence in the company," he said.

Local regulation gives any shareholder with a stake of 10 per cent or more in a company the right to call shareholders' meetings on matters including appointment or removal of directors and accountants as well as other corporate decisions.

Wong blamed the poor results on increasing competition in the sector, rising costs and the company's expansion on the mainland.

Even though turnover declined 14.5 per cent to HK$3.34 billion last year, rental expenditure increased nearly 30 per cent to HK$615.2 million.

Midland did not recommend any final dividend.

In contrast, rival Centaline Property Agency reported its Hong Kong operation posted a profit of HK$280 million last year, suggesting Midland's woes could have more to do with the way it is being managed rather than market conditions.

Albert Wong Kam-hong, a former deputy chairman of Midland, said the company was faring badly because of its failure to cut costs in response to the market downturn. "The company should be worried if it fails to turn around in the first half of this year," he said.

Shares in Midland rose 0.49 per cent to close at HK$4.12 yesterday before the results were announced.