Sunac China Suspends Shares Amid Kaisa Takeover Speculation

Sunac China Holdings Ltd. suspended trading in Hong Kong on Friday, as speculation mounted that the developer may acquire troubled Chinese property developer Kaisa Group Holdings Ltd.

The shares were halted temporarily pending an inside information announcement, according to a statement to the Hong Kong stock exchange that didn’t give details. The stock was unchanged at HK$6.94 on Thursday and has declined 12 percent this year. Kaisa shares have been suspended since Dec. 29.

Sunac has signed an agreement to buy a 49.3 percent stake in Kaisa from the founding Kwok family, Caixin reported on Friday, citing an unidentified person. The report didn’t give the price or other details.

The Shenzhen government is seeking investors for the developer, based in the southern city, since it missed a bond payment. Kaisa would become the first Chinese developer to default on a dollar bond if it doesn’t pay the missed $23 million coupon that was due Jan. 8.

An acquisition by Sunac “will be absolutely good news for Kaisa’s creditors because that means the white knight has appeared,” Johnson Hu, a Hong Kong-based property analyst at CIMB Securities Research, said by phone. “For Sunac, the market needs to see more specific details as there are still many uncertainties” regarding blocked apartments, the acquisition price and bank debts.

Dollar Bonds

Some of Kaisa’s projects in Shenzhen have been blocked by the local land authority for unspecified reasons. Those are among the developer’s best assets, with gross margins as high as 40 percent, Hu said. The developer is being investigated over alleged links to a senior official in the city, people familiar with the matter said this month.

Kaisa’s $500 million of 10.25 percent 2020 notes have ranged from 29.9 cents on the dollar to 67.1 cents in the past month as investors speculate whether it will sell assets to get cash quickly or engage in takeover talks that may involve a face off with the Kwok family. The debentures’ 30-day historical volatility jumped to 228 percent on Friday, the most on record.

The sale of a stake in Kaisa is “good news as it will remove what has been the most destabilizing factor in the market,” Alan Jin, Mizuho Securities Co.’s Hong Kong-based analyst, said by phone. “It’s positive for Sunac as well” as the Tianjin-based developer will get quality assets in a major city in southern China where it has little presence, Jin said.

Twenty-five of 26 analysts have a buy rating on Sunac’s shares and one recommends holding the stock, according to data compiled by Bloomberg.

Shenzhen’s new-home prices rose in December, the first of the 70 cities tracked by the government to see an increase in four months, after the central bank cut interest rates for the first time since 2012.

Screen grabs of Sunac Chairman Sun Hongbin’s verified Weibo account showed a message saying he voted for his own company on Jan. 28 in an online poll on which company is the most likely to take over Kaisa.

— With assistance by Dingmin Zhang

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