Heading south

Wanda reshuffles IPO plan with Zhuhai gambit


Wang Jianlin has a new backer

Five years after Wanda Commercial waved farewell to the Hong Kong bourse, the property giant is said to be eyeing a return to the city’s stock market, after a bruising period back in mainland China.

A Rmb3 billion ($460 million) investment from Zhuhai Sasac – the agency that controls the southern Chinese city’s state-owned assets – is supposed to make that reunion a little more likely.

The shopping mall developer decided to delist in Hong Kong in 2016, only a couple of years after a blockbuster debut in the city. Its boss Wang Jianlin was displeased with how investors were valuing his flagship firm, believing that a listing on a mainland bourse would bring better returns.

Wang was flying high at the time in a spending spree that brought ownership of trophy assets including a Hollywood film studio and a top Spanish football club. But Wanda then fell firmly out of favour, becoming a prime target in a debt reduction campaign demanded of some of the country’s most acquisitive companies. The cash crunch forced Wanda into a fire sale that has lasted for years (see WiC395).

All of this happened at a time when Wanda has been denied the chance to relaunch its commercial property business on the A-share market. No real estate developers have got the green light for an A-share listing but Wanda’s buccaneering reputation made an onshore share sale even less likely.

The company finally gave up the plan last month after years of trying.

With the equity markets embargoed Wanda Commercial was forced to forage for capital, including Rmb34 billion in funding from a group of investors including Tencent, Suning and in early 2018. In a deal not too different to the one that Evergrande struck with a similar group of investors (see WiC518), Wang also promised that Wanda would launch an IPO by October 2023. The clock has been ticking, upping the pressure to find a new way to market.

In this context the Rmb3 billion deal with Zhuhai Sasac is being described as a strategic move in finding new capital and a well-connected backer. Caijing magazine, for example, noted that the deal will repair Wang’s reputation for “having a bad relationship with the Chinese government”.

Zhuhai Sasac will be investing in a new unit known as Wanda Light Assets, which is tasked with managing 368 of its Wanda Plazas, plus a further 155 under construction.

Tellingly Wanda Light Assets won’t hold any property assets itself, with a company insider labouring the point to Sohu, a news portal, that the restructuring is designed to speed up the bid to go public.

Details of the deal have not been made public, including the size of stake that Zhuhai Sasac would own. Yet the deal is another example of a local government taking a stake in a private sector player, a trend we identified two weeks ago (see WiC534). In Zhuhai’s case it helps that the Sasac unit has been flush with cash since selling down its stake in Gree, an air-conditioning giant headquartered in the city (see WiC448). Like other cities, its local government also wants to attract new companies, especially in sectors deemed strategic. For instance there has been talk this year about an investment in a company affiliated to Faraday Future, the struggling electric car brand.

As a property management firm the new Wanda unit isn’t in the same bracket. But Zhuhai’s officials will still be interested in the promised IPO, which could deliver a substantial premium on their investment. The arrangement has also been shaped by ambitions for Hengqin, a special zone in Zhuhai’s orbit. Policymakers have been promoting Hengqin as a leisure and entertainment hub – effectively as a non-gaming spillover for the world’s biggest gambling centre in Macau, just a few hundred metres away. But they are hunting for a wider range of companies to set up there, amid bitter competition from other cities in the Greater Bay Area. Reportedly Faraday has rented office space in Hengqin and the case will be made that the arrival of an anchor tenant like Wanda – with its theme park experience – is even more positive, improving the chances of other companies taking the same decision.

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