China Development Bank’s private-equity arm agreed to buy 40 percent of China New Town Development Co., a Singapore and Hong Kong-listed developer focused on urban development on the mainland.
The unit of the world’s largest policy lender signed a non-binding agreement to subscribe for 3 billion shares in the company at 24.6 Hong Kong cents each, China New Town said in a statement to the Hong Kong stock exchange yesterday. The stake of controlling shareholder SRE Investment Holding Ltd. will fall to 20 percent from 33 percent, according to the statement.
The purchase is the first time China Development Bank Capital Co. has become a controlling shareholder of an overseas-listed property developer. Set up in August 2009, the unit received a special approval from the State Council to make yuan investments, and has helped its parent bank in urban projects across the country. In March 2012, it acquired a Hong Kong-listed company, New Capital International Investment Ltd., to make overseas investments.
Singapore-listed shares of China New Town rose as much as 14 percent today, the biggest gain since Dec. 28, and traded at 11.8 Singapore cents as of 11:15 a.m., a gain of 3.5 percent. The Hong Kong-listed shares fell as much as 16 percent. The developer has a market capitalization of S$536 million ($429 million). The stock was listed in Hong Kong in October 2010.
China New Town signed an agreement in April 2012 with a property fund set up by the Beijing government and CDB Capital to work on development of small towns around Beijing, according to a stock exchange statement. The “Beijing Small Town Development Fund” was set up with 10 billion yuan ($1.6 billion) in capital, it said.
Incoming Premier Li Keqiang is relying on China Development Bank to achieve the government’s policies of urbanization and cutting pollution. The state-owned bank, which had 7.37 trillion yuan in assets as of the end of 2012, has pledged to continue to support urbanization projects through loans. Half of the bank’s loans this year will go to urbanization, according to a Jan. 29 notice on its website.
China’s policy lenders -- CDB, Export-Import Bank of China, and Agricultural Development Bank of China -- were established in 1994 with mandates to help fund infrastructure, agriculture and trade. The wholly state-owned banks don’t take deposits from individuals and finance lending by issuing debt.
China Development Bank sold the most amount of bonds of any policy bank last year, raising 1.23 trillion yuan, according to data from Chinabond, the nation’s bond clearinghouse. The China Banking Regulatory Commission said last April that investors may categorize the bank’s debt as “zero” risk, meaning they have to set aside no additional capital in the event of losses, even though the lender said it plans to commercialize five years ago.
CDB Capital’s unit, China Development Bank International Holdings, could make China New Town more competitive by combining the bank’s financial background and network with the company’s experience and management team, according to the statement.