Fosun International, China’s largest privately-owned conglomerate, is launching an offer to buy out Hong Kong-listed Shanghai Forte Land Co Ltd to reposition the real estate company for future growth.
Fosun is offering HKD3.50 to buy each H share of Forte, paying a total of about HKD2.554 billion for an estimated 729.8 million shares it does not own in the property developer. The price represents a premium of about 25.79 percent to their last trading prices, according to a joint announcement. The company is also offering renminbi in cash equivalent of HKD3.50 per share to acquire Forte’s domestic shares.
Forte is expected to be delisted from the Hong Kong stock exchange after the buyout. Standard Chartered Bank is the financial adviser to Fosun International.
“Fosun believed that upon completion of the offers and withdrawal of Forte’s listing from Hong Kong stock exchange, Forte will be better positioned to fund larger property development projects through leveraging Fosun’s greater financial strength,” a company statement says.
Fosun notes that as a PRC-incorporated company, Forte’s ability to raise funds offshore is limited. The latter’s relatively high gearing ratio has impaired its capability to obtain attractive commercial funding. Fosun, meanwhile, is not able to contribute capital to Forte under the listing rules that restrict connected transactions between the parent company and its subsidiary. The delisting of Forte will also save costs and management resources related to the listing.
Listed in Hong Kong since 2004, Shanghai-based Forte is engaged in the development and sale of premium-quality commercial and residential property projects in China. The property development posted 13.62 billion renminbi of contracted sales for 2010, a year-on-year growth of 60 percent.
Fosun, founded by influential tycoon Guo Guangchang, operates a number of businesses including pharmaceuticals, property development, steel, mining, retail, services and private equity. The company currently owns about 30 percent total issued H shares and 99 percent of the total issued domestic shares of Forte.