Wanda sell-off set to take it closer to main­land relist­ing

China Daily (Hong Kong) - - BUSINESS - By LUO WEITENG in Hong Kong sophia@chi­nadai­lyhk.com

Chi­nese main­land con­glom­er­ate Dalian Wanda Group signed a 63.18 bil­lion yuan ($9.29 bil­lion) deal on Mon­day to sell 13 cul­tural tourism projects and 76 ho­tels to prop­erty de­vel­oper Sunac, a move that could shift its fo­cus to as­set-light busi­ness and bol­ster its vi­sion of relist­ing in the Chi­nese main­land.

The prop­erty-to-en­ter­tain­ment group, which has come un­der the spotlight for its global acquisition spree, said in a joint state­ment that it will sell 91 per­cent of its stake in 13 tourism projects for 29.575 bil­lion yuan, and 76 out of 102 ho­tels for 33.595 bil­lion yuan.

Sunac, based in Tian­jin and listed in Hong Kong, sus­pended trad­ing of its shares be­fore the mar­ket opened on Mon­day.

The trad­ing halt was once ru­mored to be re­lated with Sunac’s 15.04 bil­lion-yuan in­vest­ment in cash-strapped en­ter­tain­ment com­pany LeEco, whose wors­en­ing fi­nan­cial cri­sis has dragged share price of Sunac 12 per- cent lower over the past four trad­ing days, wip­ing more than HK$8 bil­lion ($1.024 bil­lion) off its mar­ket value.

Bol­stered by the head­line­mak­ing deal, the Hong Kong share price of Wanda Ho­tel De­vel­op­ment was up 46.55 per­cent to close at HK$0.85 on Mon­day, af­ter rock­et­ing as much as 155.20 per­cent in the morn­ing ses­sion to an in­tra­day high of HK$1.48.

All the projects will con­tinue to be op­er­ated un­der the group’s brand name, said the state­ment. A de­tailed agree­ment will be signed by the end of this month.

Wang Jian­lin, Asia’s rich­est man who runs Wanda em­pire, said the deal shows Wanda’s de­ter­mi­na­tion to set its sight on in­no­va­tive and as­set-light busi­ness, in­clud­ing film and tele­vi­sion, sports, tourism, in­ter­net and fi­nance, ac­cord­ing to Chi­nese main­land busi­ness news out­let Caixin.

Such a shift of busi­ness strat­egy is in line with the big-spend­ing con­glom­er­ate’s over­seas in­vest­ment in foot­ball clubs and film stu­dios, the sec­tors that Wang says are promis­ing but are yet to be de­vel­oped in the Chi­nese main­land.

The two com­pa­nies, in par­tic­u­lar, highlight a “strate­gic part­ner­ship” in film and other sec­tors in the state­ment.

“Sunac’s in­vest­ment in LeEco may fit well and cre­ate syn­er­gies with Wanda’s am­bi­tion of de­vel­op­ing in­no­va­tive and as­set-light busi­ness. This may make the deal a win­ning growth for­mula for both par­ties,” said Han­nah Li Wai-han, a strate­gist at UOB Kay Hian (HK).

Sunac Chair­man Sun Hong­bin, as quoted by Caixin, said the money used to close the deal is com­pletely out of Sunac’s own pocket.

Dis­miss­ing in­vestor con­cern over a pos­si­ble new fi­nan­cial bur­den im­posed on Sunac, Sun re­vealed that the com­pany recorded a cash bal­ance of 90 bil­lion yuan on its bal­ance sheet in the first half of 2017, and ex­pects an an­nual turnover of more than 300 bil­lion yuan.

Wang said all pro­ceeds from the deal would be used to re­pay loans and lower its debt-to-as­set ra­tio. The con­glom­er­ate is look­ing to pay off the ma­jor chunk of its bank loans by the year-end and clear all the debt within the com­ing three years,

The deal may mark a step closer for Dalian Wanda Com­mer­cial Prop­er­ties, the prop­erty unit of Wanda Group, to relist on the main­land and cash in on higher val­u­a­tions on do­mes­tic mar­kets af­ter it delisted in Hong Kong last year.

“Wanda is still trapped in a log­jam of firms lin­ing up for IPO ap­proval,” said Li. “The con­glom­er­ate took a hit from a sell-off last month, which may make it dis­pose of some of its non-core as­sets to ad­dress the liq­uid­ity con­cern.”

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