HONG KONG • China's Dalian Wanda Group is offering US$4.4 billion (S$6 billion) in cash to buy out Hong Kong-listed unit Dalian Wanda Commercial Properties, part of a plan to take it private before relisting it in Shanghai, where it hopes to gain better valuations.
The buyout is the biggest take-private deal on the exchange ever. The transaction is pending shareholder and regulatory approvals, according to the statement.
Mainland-listed firms typically command higher valuations than those in Hong Kong, helped by a large pool of retail investors.
An index tracking dual-listed companies shows mainland listings trade at an average 34 per cent premium to the same company listed in Hong Kong.
The move comes just 15 months after Wanda Commercial's market debut. The group, led by tycoon Wang Jianlin, has set up a special-purpose vehicle to buy all the Hong Kong-listed shares of the property unit.
Investors in the special-purpose vehicle will receive up to 12 per cent annual interest on their holdings if the property arm fails to relist in China within two years.
The HK$52.80 per share offer represents a 10 per cent premium to Wanda Commercial's initial public offering (IPO) price and values China's biggest commercial property developer at about US$31 billion. It is also a 44.5 per cent premium to the unit's closing price on March 29.
But the stock, which only just resumed trade after a one-month suspension, lost 2.6 per cent yesterday to stand at HK$48.70.
Dalian Wanda said in a statement it would not increase the offer price.
Mr Wang told China Central Television on May 22 the Hong Kong unit is "substantially undervalued" and must be taken private.
A document to investors showed Wanda Commercial's shares were valued at an estimated 8.6 times earnings this year, much lower than an average of 29.1 times for commercial property developers listed on China's domestic A-share market.
The billionaire has been seeking investors to help buy as much as 14.41 per cent of the unit and relist it in mainland China, according to a document sent to prospective backers.
The company may seek a backdoor listing on the Shanghai exchange if it does not get regulatory approval to launch a planned IPO there soon, according to two people with knowledge of the matter.
Mr Wang joins a growing number of Chinese tycoons seeking loftier valuations for their companies by moving their listings from Hong Kong or New York.
But the deals that aim to relocate overseas share listings to Shanghai or Shenzhen have been under the spotlight after China's stock regulator voiced concerns such transactions could flood its market.
Wanda's proposed transaction would be the biggest going-private deal on the Hong Kong stock exchange, beating Alibaba Group Holding's proposal in 2012 to take its Hong Kong-traded unit private for as much as HK$19.6 billion (S$3.5 billion), according to data.