China Evergrande Unit Flags Possible Takeover Bid

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Property-Services subsidiary halts business in Hong Kong; A deal can bring much-needed cash to its parent company.

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A rival developer, Hopson Development Holdings Ltd.

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, said on Monday its shares were on hold pending an announcement about a transaction involving a Hong Kong-listed target company, which it did not name.

Evergrande has lagged behind in payments to global bondholders. It is seeking to raise funds by selling assets outside its core development business, which includes its asset-management and electric-vehicle arms and a stake in the Hong Kong office building.

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Property management has emerged as an industry in China, and many of the country’s large developers have obtained separate stock-market listings for these businesses, which manage apartment complexes and services such as babysitting, groceries and repairs. Assist residents with services.

According to FactSet, the Evergrande subsidiary, which listed on the Hong Kong Stock Exchange in December 2020, has a market capitalization of approximately $7.1 billion. The parent company raised approximately HK$37.5 billion, equivalent to $4.8 billion, from the initial public offering of the unit and pre-sale of shares to pre-IPO investors. As of May, Evergrande retained a stake of about 61% in the business, the filing shows.

Evergrande did not immediately respond to a request for comment. Calls to Hopson’s Hong Kong and mainland offices were not answered. Mainland China is observing a week-long holiday following its National Day on Friday.

Hong Kong-listed Hopsan is majority owned by billionaire Chu Mang Yi, a former local-government official in the mainland who founded the business in 1992. His daughter, Choo Kut Yeung, succeeded him as chairman last year.

The company is significantly smaller than Evergrande and reported revenue equivalent to about $2.1 billion for the first six months of this year. About 7% of that figure was derived from asset management. Hopsan has properties mainly in southern Chinese cities such as Shenzhen and Guangzhou, the Yangtze River Delta including Shanghai and Hangzhou, and the economic region around Beijing and Tianjin.

Last week Evergrande agreed to sell a roughly 20% stake in a commercial bank it owns, the Shengjing Bank Co., to a Chinese state-owned enterprise for the equivalent of about $1.5 billion. Shengjing Bank has demanded that Evergrande use the net proceeds from that stake sale to pay off developer dues, a filing showed.

Another listed Evergrande entity, China Evergrande New Energy Vehicle Group Ltd.

facing financial challenges. Late last month the EV business warned it was facing a “severe shortage of funds” and may not be able to meet its financial obligations.

Elaine Yu [email protected] . Feather

.

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