Hong Kong Billionaire Plans To Take Chinese Estates Private After Losses From Evergrande
Joseph Lau and his wife Chan Hoi Wan have proposed to take Chinese Estates Holdings private for HK$1.91 billion ($245 million) after incurring steep losses on its investment in cash-strapped China Evergrande Group.
Chinese Estates said in a filing to the Hong Kong exchange that it’s offering HK$4 apiece to acquire the 25% of the company’s shares that are held by outside investors. The firm said the offer represents a premium of approximately 83.5% over its closing price of HK$2.18 on September 28, the day before its shares were suspended.
Chinese Estates saw its shares soar 31.7% on Thursday after they resumed trading. The surge brought the premium down to only 4.7% over its closing price of HK$3.82. Lau and Chan control nearly 78.6% of Chinese Estates’ outstanding shares.
Chinese Estates said its investment in Evergrande has added a burden to the firm’s operations, which had already suffered setbacks during the pandemic. The Hong Kong company expects to realize a loss of HK$10.4 billion for 2021 if it sells the remaining shares it holds in Evergrande.
“The uncertainties in the current property and financial markets, including rising interest rates, have made the company’s stock price unpredictable and have posed very high risk for investors,” said Chan, the CEO of Chinese Estates, in a written response. She added that the proposal to delist is to “offer minority shareholders a good opportunity to cash out without liquidity risk” and “transfer all the risks to herself.”
Upon the completion of the privatization, Chinese Estates will be held by three British Virgin Island-based companies, which are all controlled by Chan. The Hong Kong real estate developer said the listing withdrawal could provide more flexibility to its long-term business strategies “without having to focus on the short-term market reactions or regulatory restrictions.”
Chinese Estates, which has residential and commercial properties in Hong Kong, mainland China and the U.K., said it had recorded a net loss of HK$37 million in the first half of 2021, down 95.3% from the same period last year. Its revenue plunged 63% year-on-year to HK$726 million for the six months ended June, according to the filings. With Evergrande’s stock price plummeting more than 85.4% over the past year, Chinese Estates found it even more difficult to staunch the flow of red ink.
Lau has been longtime business ally and friend of Evergrande’s chairman Hui Ka Yan for more than a decade. The two tycoons had engaged in a series of major real estate deals over the years. But as Hui has been struggling to save his property flagship from collapsing under the weight of more than $300 billion of debt. Lau and Chan have just been offloading their shares in the Shenzhen-based property developer.
Lau retired as the chairman of Chinese Estates seven years ago. The 70-year-old said he transferred most of his wealth to his wife and a son in 2017, citing serious health issues. The bulk of his fortune is now derived from prime his real estate holdings in Hong Kong.