China multi-billion dollar hotel sale in last minute change

  • Property
  • Wednesday, 19 Jul 2017

Chairman of China's Wanda Group Wang Jianlin gives a speech during the signing ceremony for the strategic partnership between Wanda Group, Sunac and R&F Properties Group in Beijing on July 19, 2017. / AFP PHOTO / WANG ZHAO

BEIJING: Chinese conglomerate Wanda will sell almost 80 hotels to Guangzhou-based R&F Properties instead of developer Sunac China in a last-minute change to one of the country’s largest ever property deals.

The news follows reports that Chinese regulators are taking a closer look at Wanda’s finances in the wake of a series of massive, high-profile foreign acquisitions.

Last week, Sunac China Holdings announced it would buy 76 hotels and a 91% stake in 13 other “cultural and tourism projects” from Dalian Wanda Group in a gargantuan deal valued at 63.2 billion yuan (RM40.1bil).

But in joint statement Wednesday, the companies said R&F Properties would instead buy 77 hotels for 19.9 billion yuan (RM12.6bil).

Sunac will now only buy a majority stake in the 13 cultural assets, and for a price of 43.8 billion yuan (RM27.8bil) -- up from 29.58 billion yuan (RM18.8bil) quoted last week. 

Wanda’s billionaire chairman Wang Jianlin said Sunac had already paid 15 billion yuan to Wanda Commercial Properties, the conglomerate’s real estate arm, and would not need to borrow money from Wanda to complete the rest of the transaction, as previously stated.

”Through this deal, Wanda is significantly reducing its debt and recovering a lot of cash. The agreement also marks our road towards an asset-light strategy in hotels and tourism as well as other business endeavours,” he said.

Wanda has diversified rapidly in recent years from commercial property into entertainment, theme parks, sports and other sectors, and is now reportedly facing difficulty paying off debts run up in its buying sprees.

Wang’s latest comments come on the heels of reports that China plans to squeeze Wanda by cutting off new loans and regulatory approvals for deals, punishing it for breaching Chinese restrictions on overseas investments. 

Six of Wanda’s high-profile acquisitions in recent years are now being scrutinised by regulators, according to Bloomberg News.

Wanda admitted last month that China’s banking regulator was looking into potentially risky loans the company held.

”All along everyone has been very interested in Wanda Commercial Properties’ debt problems and other issues,” Wang said Wednesday.

”Most people genuinely care, but some are just deliberately looking for trouble,” he said, before rattling off a list of figures related to everything from how many people the company directly employed (2 million) to how much cash it had on hand (100 billion yuan).

From these figures, said Wang, “everyone can judge whether Wanda’s debt is high or not and whether or not it’s a good company.”

Beijing has traditionally encouraged companies to invest overseas to find new markets, access technology and increase China Inc’s influence.

But it has reversed course recently as concerns grow over capital flight, a weakened Chinese currency, and potentially unsound acquisitions.

Authorities also are moving aggressively to corral alarming levels of debt and risky lending amid warnings of a potential financial contagion in the world’s second-largest economy. - AFP
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