From running football clubs to buying movie studios and cinema chains, China Evergrande and Wanda Group have gone head-to -head in a number of sectors.
And both property conglomerates seem to be sharing a similar fate when it comes to spinning off their real estate units in the Chinese share markets.
Each had hoped that a return from overseas to a domestic bourse would give their valuations a quantum boost. However their applications to IPO have been held up on the waiting list for over two years.
Take Evergrande. The company has been working on a plan to float its unit Hengda Real Estate on the Shenzhen bourse since 2016. Progress has been slow, probably because the China Securities Regulatory Commission is reluctant to vet big-ticket property listings as part of the government’s push to prevent the real estate market from overheating.
Over the past two years Evergrande has stopped paying dividends, with the view that the they would resume after Hengda floats. So shareholders got a surprise last month when the Hong Kong-listed firm declared a HK$16.8 billion ($2.2 billion) special payout. Evergrande’s share price climbed more than 4% in a session but Hong Kong’s Apple Daily believes the unexpected largesse could also signal that Hengda’s A-share listing is still distant.
Likewise, Wanda took its Hong Kong-listed commercial unit Wanda Commercial private in August 2016 and promised the backers that funded the HK$35 billion deal that the company would go public again in the A-share market within two years.
Again the plan hasn’t worked (the deadline was last month). Wanda instead sold a 15% stake to investors that included Tencent and Suning to raise funds earlier this year.
The similarities between Evergrande and Wanda do not end there. Recall that in 2016 – when Wanda was in full-on acquisition mode – its boss Wang Jianlin had talked about taking on Disney and surrounding “the tiger” (aka Disney’s Shanghai theme park) with a “pack of wolves”, or his Wanda-developed theme parks (see WiC327).
Wanda called time on its dream of dismembering Disney when it sold most of its hotels and theme parks last year as it scrambled to raise funds (the authorities demanded that it deleverage; see WiC375). But it appears that Evergrande has picked up the baton in the theme park world, announcing its own plans to build 15 theme parks across China.
Analysts have estimated that the Guangdong-based firm would need to invest close to Rmb600 billion ($87.73 billion) in these “Evergrande Children’s World” parks. Each park is supposed to boast 33 main attractions (a Disney park usually has about 20) and will be designed around Chinese cultural themes such as the classic novel Journey to the West.
When (or if) completed, Evergrande hopes the parks will welcome 20 million tourists a year, though HK01, a news website, called that ambitious, given the declines in China’s birth rate.
“A Wanda theme park in Hefei has 25 facilities and nearly half of them have been shut down,” it also noted, citing media reports.
Wanda is yet to try its hand at making electric vehicles (EV). In July Evergrande opted to do just that with a major investment in Faraday Futures, the car firm formerly controlled by the sprawling (but failing) tech empire LeEco (see WiC416).
Somewhat incongruously, it put in the money via Evergrande Health and the market value of the Hong Kong-listed healthcare unit has spiked more than eight times in the past year.
But investor sentiment on the Faraday deal may be souring somewhat. Apple Daily notes that Evergrande Health’s shares have dipped close to 40% over the past week, wiping out nearly HK$50 billion in market value…
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