SPG Land to Sell Control, Hotel Stake, Pay Special DividendJoshua Fellman
SPG Land Holdings Ltd. said it will sell both a controlling stake in itself and its half interest in Shanghai’s Peninsula hotel, raising $561.5 million to repay bank loans, fund projects and distribute a special dividend. The shares almost doubled.
Greenland Holding Group Co. will pay HK$3 billion ($386 million), or HK$1.90 a share, for new stock representing a 60 percent stake in the developer, SPG said yesterday in a filing to the Hong Kong stock exchange. SPG Chairman Wang Weixian will buy the company’s 50 percent stake in the Peninsula Shanghai for 1.08 billion yuan ($175 million), according to the statement.
In March, China ordered higher down-payments and borrowing costs for second-home mortgages in cities with “excessively fast” price gains, as well as stricter enforcement of taxes on sales. Shanghai-based SPG is among developers with a large proportion of high-end projects that appeal to speculative buyers and so are “more exposed” to the new rules, according to a March 5 Moody’s Investors Service report.
Greenland’s investment “will strengthen the financial position of the group, raise the profile of the group in Hong Kong and China, and allow the group to benefit from the strong support and resources of Greenland,” SPG said in the filing. The company plans to change its name to Greenland Hong Kong Holdings Ltd.
Investors in the company’s $200 million of 13.5 percent notes due April 2016 last year agreed to change the terms of its debt to allow the company more flexibility to sell assets.
SPG shares jumped as much as 93 percent, its biggest gain since October 2006, after trading resumed in Hong Kong today. The stock surged 87 percent to HK$7.14 at the close of trading, the highest since November 2007. It has more than tripled in value this year, compared with a 2.5 percent gain in the city’s benchmark Hang Seng Index.
For the Peninsula sale, the company said its joint-venture agreement gives partner Hongkong & Shanghai Hotels Ltd. the right to buy the company’s stake at a 20 percent discount to market value if Wang’s holding in SPG falls to less than 50 percent. The disposal avoids this preemption right, SPG said.
SPG said it plans to issue four bonus shares for each share held to maintain its public float after the stake sale. Wang will take convertible preference shares in place of bonus stock, SPG said. After the bonus issue, SPG plans to consolidate every five shares into one new share.
The company will then pay out HK$1.275 a consolidated share, or about HK$1.34 billion, as a special dividend. This will leave the company total net proceeds of about HK$2.94 billion from the disposal and share issue with which to pay bank loans and fund real estate projects, the company said.
Greenland is a state-controlled, Shanghai-based company that owns real estate projects in 70 cities in 25 Chinese provinces, SPG said. Greenland also invests in energy and finance, it said.
The deals are subject to regulatory waivers and shareholder approval, SPG said.