China's richest man likely to gain shareholder support for Wanda delisting

Chinese tycoon Wang Jianlin is likely to win backing for a US$4.4 billion Hong Kong delisting of Dalian Wanda Commercial Properties.
Chinese tycoon Wang Jianlin is likely to win backing for a US$4.4 billion Hong Kong delisting of Dalian Wanda Commercial Properties.PHOTO: REUTERS

HONG KONG (REUTERS) - Chinese tycoon Wang Jianlin appears likely to win backing on Monday for a US$4.4 billion (S$5.9 billion) Hong Kong delisting of Dalian Wanda Commercial Properties, several shareholders said - part of a grand scheme to reap higher valuations by going public on the mainland.

The HK$52.80 (S$70.79) per share offer by China's richest man for shares in the flagship firm of his Wanda empire represents only a 10 per cent premium to pricing for its intial public offering (IPO) that took place less than two years ago, and some analysts were initially sceptical that it would be enough.

But it is 30 per cent above the stock's trading price prior to news of the buyout. Also helping bring many investors on side was Mr Wang's decision to term the offer as final, as well as slower profit growth for Wanda Commercial and bleaker prospects for the Chinese property sector, shareholders said.

Influential proxy advisors ISS and Glass Lewis have voiced their support. Glass Lewis called the offer price "fair and reasonable to independent shareholders".

"Most of the comments so far have been positive. There's no reason for other investors to act differently and pull the rug out from everyone else," said an official at Kuwait Investment Authority, a major shareholder owning 7.4 per cent of the company. "There will be a lot of opportunities to cooperate with Wanda in the future as it is expected to do well in the next 10 years, so why jeopardise the relationship?" he added, declining to be identified as he was not authorised to speak to the media.

After the deal, set to be Hong Kong's biggest buyout to date, Mr Wang aims to relist on the mainland within two years. That will allow him to tap a huge pool of enthusiastic investors in mainland China, where valuations for commercial property firms are generally three times greater than those in Hong Kong.

Higher valuations could allow Wanda Commercial to reduce potential funding costs, either through new share issues or if it were to acquire firms through share swaps. The buyout could spur other Chinese firms to abandon the Hong Kong bourse, tarnishing its image as a major financial centre.

Wanda Commercial, which has a market value of some US$30 billion, has a 14 per cent free float. Three quarters of independent shareholders need to agree to the proposal for it to pass and it can be blocked if 10 per cent do not agree.

China Life Insurance, which also owns 7.4 per cent, and Timing Investment, another cornerstone investor with 2.5 per cent, have said they plan to approve.

Some other shareholders collectively owning 4 per cent plan to vote in favour, their representatives told Reuters. They too declined to be identified as they were not authorised to speak to the media.

Wanda Group declined to comment for this article. Two of biggest investors in Wanda Commercial, BlackRock and Vanguard which together own around 7 per cent, also declined to comment.

On Thursday, Wanda Commercial's shares were trading at HK$50.80, underscoring expectations for an approval at the shareholders meeting in Beijing are quite high.