Evergrande to Raise $1.5 Billion From New World, Investors

  • Securities are convertible into stock at HK$8.06 each
  • New World sold $2.1 billion projects to Evergrande this month

Evergrande Real Estate Group Ltd. will raise $1.5 billion by selling convertible securities to investors including New World Development Co., replenishing capital after an acquisition spree by the Chinese developer this year.

The investors include New World China Land Ltd. and Chow Tai Fook Enterprises Ltd., which are controlled by the family of billionaire Cheng Yu-Tung, Evergrande said in a filing to the Hong Kong stock exchange late Wednesday. The securities are convertible into stock at HK$8.06 each, and would give the investors a combined 9.36 percent stake in the enlarged share capital, China’s third-largest developer said.

The deal further cements ties between two of the richest men in China and Hong Kong that go back to at least 2008 when Cheng’s family investment company was part of a group of investors that bought a $506 million stake in Evergrande the year before its initial public offering. Earlier this month, Hui Ka Yan’s Evergrande agreed to buy 13.5 billion yuan ($2.1 billion) of assets from New World China Land. Evergrande has also made other acquisitions this year, including paying a record price for the Mass Mutual Tower in Hong Kong and a stake in an insurance venture.

"Evergrande needs new financing and the convertible securities are a good investment for New World China,” said Toni Ho, an analyst at RHB OSK Securities Ltd. “The chairmen of the two companies have built up a solid relationship over a long period of time.”

Cooperating Parties

Evergrande shares rose 2.7 percent to HK$6.50 at the close of trading in Hong Kong ahead of the holiday break. New World Development fell 2.2 percent to HK$7.61, while New World China Land dropped 2.4 percent to HK$6.05.

“The subscription will combine the strengths of the company and the subscribers and foster the cooperation between the parties,” Evergrande said in the statement. Proceeds will be used for the purchase of property projects in the first- and second-tier cities in China, it said.

The two New World companies are buying $900 million of securities, with the rest sold to Chow Tai Fook Enterprises and other investors, according to Evergrande.

— With assistance by Lisa Pham, and Emma Dong

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