CapitaLand, Southeast Asia’s biggest developer, agreed to buy the Chinese property assets of Orient Overseas (International) for US$2.2 billion ($3.06 billion), doubling its real estate holdings in the world’s most-populous nation.
The purchase of the Orient Overseas Developments unit includes seven sites in Shanghai, Kunshan and Tianjin, with about 1.48 million square meters of floor space, the Singapore- based developer said in a statement today. About half is residential and the rest is office, retail and hotel space.
CapitaLand raised $2.8 billion from the initial public offering of CapitaMalls Asia in November. Orient Overseas, Hong Kong’s biggest container line, is selling its real estate projects in China after a slump in global trade and excessive capacity in the shipping industry led to its first loss in 10 years. Orient Overseas reported a US$231.8 million ($322.4 million) loss in the first half ended June 30.
“It’s a good price,” said Geoffrey Cheng, a transport analyst at Daiwa Institute of Research in Hong Kong. “Orient Overseas should be using the cash to focus on shipping.”
Orient Overseas spokesman Stanley Shen declined to comment on the deal. Orient Overseas, controlled by the family of former Hong Kong Chief Executive Tung Chee-hwa, had revenue from property development of HK$14 million ($2.5 million) in the first half of 2009, or less than 1% of total sales of HK$2.07 billion. Tung was Hong Kong’s first post-colonial leader after Britain handed the colony back to China in 1997.
Redeploying Capital
CapitaLand is “in a very good position” to redeploy funds raised from the CapitaMalls IPO, Donald Chua, a Singapore-based analyst at CIMB-GK Pte., said before the announcement. “Redeployment of capital was lacking last year.”
CapitaLand was halted from trading in Singapore today pending an announcement, as was Orient Overseas in Hong Kong.
The developer said it will take over a shareholder loan of US$1.05 billion owed by Orient Overseas Developments to its parent, and fund the acquisition from internal cash resources.
The sale comes after the Chinese government’s attempts to cool the mainland property market, such as stopping hoarding by developers expecting price gains.
“Any measures that the Chinese government takes to stabilise the market, we welcome them,” CapitaLand Chief Executive Officer Liew Mun Leong said at a press briefing today.
More Takeover Targets
Underlying demand for property in China remains, Jason Leow, the CEO of CapitaLand China, said at the event in Singapore. The Orient Overseas unit will be integrated into CapitaLand China, including employees, Leow said. He said he didn’t know whether CapitaLand made the highest bid for the unit.
CapitaLand wants China to account for 35–45% of its total business in the next three to five years, or about $10 billion, it said Dec 11. The company’s asset size in China was $6.7 billion, or 28% of the total, at the end of September, it said.
CapitaLand may look at other acquisitions in China, and “also Vietnam and possibly Singapore” following this deal, Chief Financial Officer Olivier Lim said at today’s press event. Lim said there are no plans to list CapitaLand’s Chinese business at present.
Lim said the acquisition “will have some impact on the decision-making process” regarding whether to pay a special dividend from the CapitaMalls Asia IPO. The company said in November it would recommend paying a special dividend following the listing.
Source: The Edge, 18 Jan 2010
No comments:
Post a Comment