China Overseas Land & Investment Ltd. said it will buy the Chinese residential property assets held by Citic Ltd. for about 31 billion yuan ($4.8 billion), as it expands its presence across the nationâ€™s cities amid surging land prices.
China Overseas will sell 1.1 billion shares at HK$27.13 each to the Citic companies as part of the transaction, it said in a statement to the Hong Kong stock exchange on Monday. China Overseas rose as much as 6.8 percent to HK$27.50 in Hong Kong, the most in almost a month. Citic fell 1.5 percent to HK$12.14, after jumping 9.2 percent on Friday.
The property projects that China Overseas is acquiring span 25 Chinese cities including top-tier hubs such as Beijing, Shenzhen and Shanghai and smaller ones such as Foshan and Chengdu. Property prices in Chinaâ€™s largest centers have surged this past year amid the governmentâ€™s moves to stimulate the real estate market, and regulators have pledged to dissolve a glut of unsold homes in lower-tier cities.
Edison Bian, a Hong Kong-based analyst at UOB Kay Hian Ltd., said the move is â€œjustifiedâ€ for China Overseas given its ample cash and the intensifying competition for land amid high prices. The 24 million square meters of land being acquired, equivalent to more thanhalf of China Overseasâ€™ existing land bank as of June 30, will be â€œhighly beneficialâ€ to the companyâ€™s future development.
â€œCOLI struggled to finish the sales target last year, due to the limited saleable resources, leading to this major acquisition which will certainly help the company to catch up the game and remain seated in a leading position,â€ he said.
Citic, Chinaâ€™s biggest conglomerate that sprang from the nationâ€™s first state-owned investment corporation, has been seeking to unlock value from its land portfolio over the past year as it streamlines its operations amid a broader restructuring of state-owned enterprises. The sale will leave it with an approximately 10 percent stake in China Overseas and it will also receive additional assets valued at an estimated 6 billion yuan.
â€œProperty restructuring has been a long-awaited move by investors,â€ analysts at Credit Suisse Group AG wrote in a note to clients on Monday. The move at Citic, along with others in recent months, â€œled us to believe that the trend of property-related SOE restructuring is real.â€
Greentown China Holdings may be the next one to benefit from the restructuring of State-owned companiesâ€™ property-related operations, the analysts wrote.