New World to Prepare Buyout Offer for $7 Billion China Unit

  • Minority shareholders rejected privatization proposal in 2014
  • New World has enough cash this time, Bocom International says

New World Development Co., controlled by the family of 90-year-old Hong Kong billionaire Cheng Yu-tung, is planning an offer to take its $7 billion China unit private, a person with knowledge of the matter said.

New World Development could make an announcement as soon as this week on a bid to buy the shares it doesn’t already own in New World China Land Ltd., the person said, asking not to be identified as the information is private. The stock not already controlled by Cheng’s companies is worth about $2.1 billion based on New World China’s last closing price, data compiled by Bloomberg show.

Minority investors, helped by a regulation giving each investor the same voting right, rejected a 2014 attempt by New World Development to take the China unit private for $2.4 billion, forcing Cheng to wait at least 12 months for another try. New World Development, holding about HK$31 billion ($4 billion) in cash as of June 30, has more than enough money for the offer this time after a rights issue and last year’s strong sales, according to Bocom International Holdings Co.

“There’s no pressure financially, and it’s a very reasonable thing for them to do,” Bocom International’s Hong Kong-based analyst Alfred Lau said by phone.

Evergrande Deals

Shares of New World Development and New World China were halted from trading on Monday, pending an announcement related to a takeover or merger, according to separate statements to the Hong Kong stock exchange. The China unit closed on Dec. 31 at HK$6.21, or about 8.7 percent lower than the 2014 buyout offer of HK$6.80 per share.

Any offer would come after New World China agreed last month to sell 7.3 billion yuan ($1.1 billion) of properties in two Chinese cities to Evergrande Real Estate Group Ltd., controlled by billionaire Hui Ka-yan.

New World Development and companies associated with Cheng already own about 70 percent of New World China, exchange filings show. A representative for New World Development said she couldn’t immediately comment, while a spokeswoman for New World China declined to comment.

Rearranging Holdings

The 2014 proposal was rejected by New World China shareholders due to a regulation known as the “headcount test.”

The China unit, which listed on the Hong Kong stock exchange in 1999 at HK$9.50 a share, has residential, retail, office, and hotel projects in more than 20 Chinese cities, including Beijing and Shanghai, according to its website.

Cheng transferred his shares in six Hong Kong-listed companies valued at about HK$3.8 billion to a family holding firm, almost four years after announcing retirement from his main business, according to company filings last month.

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