Long-time supporter withdraws amid property market turmoil
Chinese Estates Holdings, a Hong Kong real estate firm linked to billionaire Joseph Lau, has announced plans to go private following a sharp decline in its stock value. The move highlights the growing fallout from the financial troubles of China Evergrande Group, one of its long-time investments.
Privatisation Offer from Lau Family
The Lau family, which controls 75% of Chinese Estates, has offered to buy out minority shareholders at HK$4 per share, valuing the 25% stake at HK$1.91 billion (S$333.2 million). This decision follows an 18-year low in Chinese Estates’ stock price, reflecting the firm’s diminishing confidence in Evergrande’s ability to recover from its current crisis.
Joseph Lau, a former chairman of Chinese Estates, is a prominent member of the “Poker Club,” a group of wealthy tycoons who have historically supported Evergrande’s ventures. However, the escalating risks surrounding Evergrande’s liquidity and the potential collapse of its business have prompted a strategic withdrawal.
Mounting Concerns Over Evergrande’s Stability
Chinese Estates was once a significant shareholder in Evergrande, owning nearly 9% of the developer at its peak. However, it began reducing its stake in August, citing doubts about Evergrande’s remedial measures to stabilise its operations.
The firm estimates a potential loss of HK$10.4 billion if it divests its remaining Evergrande shares this year, exacerbating financial pressure on its operations. This follows earlier losses of HK$9.5 billion projected just a month prior.
Wider Implications for the Lau Family and Chinese Estates
Solar Bright, a company owned by Lau’s wife, Chan Hoi-wan, is spearheading the privatisation offer alongside other family members. Chan, a former entertainment reporter, became the CEO of Chinese Estates in February, following Lau’s resignation in 2014 due to a conviction for bribery and money laundering in Macau.
Chinese Estates’ challenges extend beyond its Evergrande stake. The company, which develops residential and commercial properties across Hong Kong, mainland China, and the UK, has been grappling with losses caused by the pandemic.
Its initial investments in Evergrande between 2017 and 2018 were made at an average price of HK$15.80 per share, while the stock now trades at around HK$3. Additionally, Chinese Estates had supported Evergrande’s property services and electric vehicle ventures in recent years, further tying its fate to the embattled developer.
Stock Performance and Valuation
Chinese Estates’ shares surged 33% to HK$2.90 before trading was halted in anticipation of the privatisation announcement. The proposed deal values the firm at HK$7.63 billion, a significant premium over its current market value of approximately US$710 million. Trading is expected to resume on 7 October.
Impact of Evergrande’s Troubles on the Property Market
Evergrande’s financial crisis continues to ripple through China’s property sector, with fears of broader economic implications. As one of Evergrande’s key backers retreats, the move underscores the deepening uncertainty and the challenges faced by businesses with significant exposure to the developer.
This development marks a turning point for both Chinese Estates and the Lau family, as they attempt to insulate themselves from Evergrande’s potential collapse while seeking to refocus their resources in a volatile market environment.
