Tuesday saw a buyout offer from Chow Tai, the billionaire Cheng family’s private investment firm, for NWS Holdings, the infrastructure division of the family’s New World Development real estate conglomerate, for up to HK$35.5 billion ($4.5 billion).
Chow Tai reported to the Hong Kong stock exchange that it is proposing HK$9.15 per share to buy the shares of NWS that it does not already hold.This includes a 60.9% share held by New World Development, which would reduce the property developer’s financial burden. Currently, Chow Taidirectly owns around 2.5 percent of NWS.
According to Chow Tai, the offer represents a 14.5% premium over the company’s Friday closing price of HK$7.99, immediately before its shares were suspended.
In addition, the statement states that it represents a premium of 30.9% over the average closing price of HK$6.99 for the 30 trading days just before the trading stoppage. Following the restart of trade on Tuesday morning, shares of NWS increased by 10.3%.
According to the release, the offer will “immediately strengthen New World Development’s financial position” and “enhance New World Development’s strategic focus on property development, property investment, and property-related businesses.” The sale of the shares will net New World Development approximately HK$21.8 billion.
According to the statement, Chow Tai may use its option to take NWS private if several requirements are satisfied, including acquiring at least 90% of the outstanding shares of NWS. Henry Cheng, the oldest child of New World founder Cheng Yu-tung, serves as chairman of both New World and NWS and is a director of Chow Tai.
The acquisition occurs as New World Development ramps up the sale of non-core properties to reduce debt in the face of rising interest rates and falling real estate values. The massive real estate company has stated its intention to sell non-core properties valued at HK$10 billion during the fiscal year that ended in June.
NWS is New World Development’s industrial flagship, operating in toll roads, construction, and insurance. Revenue grew 7.8% year on year to HK$17.6 billion for the six months ended in December, according to the company’s most recent results report. During the same time period, its net profit plummeted by 26.6% to HK$1.2 billion.