Greentown China Holdings Ltd. (3900) jumped to the highest in more than two weeks in Hong Kong trading, after saying it was in talks to sell a stake of as much as 30 percent to Sunac China Holdings Ltd. (1918)
Greentown, the biggest developer in eastern Zhejiang province, was 2.8 percent higher at HK$8.03 at the close of trading in Hong Kong after rallying as much as 11 percent. The stock closed at the highest since April 29.
Sunac, the Tianjin, China-based luxury-home builder part owned by buyout firm Bain Capital LLC, is in discussion with three of Greentown’s shareholders, including Chairman Song Weiping and Chief Executive Officer Shou Bainian, according to two statements from the companies to the Hong Kong stock exchange yesterday. No agreement has been signed, they said.
“For the past year, Chairman Song and CEO Shou, who are both in their late 50s, have been searching for successors,” China International Capital Corp. analysts, led by Beijing based Eric Yu Zhang, wrote in a report today. “Sunac is a perfect choice” because of its “strong franchise” and because the two have already “forged a trusting relationship.”
Greentown in 2012 sold stakes in nine real estate projects to Sunac for 3.37 billion yuan ($541 million) to repay loans and boost working capital. The two companies jointly bought a property project in Shanghai for 5.68 billion yuan about a year ago from Arch Capital Success Ltd.
“The two companies have a positive track record of cooperation,” wrote Fitch Ratings analysts led by Andy Chang in a report today. The deal won’t hurt the credit profile of Sunac because of “sufficient liquidity,” they said.
Both developers resumed trading today after their shares were halted yesterday. Sunac declined 6.5 percent to HK$3.86, the biggest decline since Feb. 24.
Sunac has declined 17 percent this year in Hong Kong and Greentown has slumped 32 percent. The benchmark Hang Seng Index has dropped 2.6 percent in 2014.
China’s central bank this week called on the nation’s biggest lenders to accelerate the granting of mortgages, after falling home sales and property construction helped drag the world’s second-largest economy to its slowest pace in six quarters in the first three months of this year.
Developers including China Vanke Co. and Greentown have cut property prices since March to lure homebuyers, according to China Real Estate Information Corp.
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