Notable consolidation in the PRC real estate sector Reinforcing China Overseas’ leadership position in 1st & 2nd tier cities
(Hong Kong, 14 March 2016) China Overseas Land and Investment Limited (the “Company”; Stock Code: 00688.HK) announced that, the Company has reached an agreement with CITIC Pacific Limited (“CITIC Pacific”), CITIC Corporation Limited (“CITIC Corporation”, together with CITIC Pacific, the “CITIC Sellers”) and CITIC Limited (together with its subsidiaries, the “CITIC Group”), that the Company will acquire the CITIC target group, which after reorganisation holds substantially all the residential-focused property development projects in the PRC currently owned by CITIC Limited through CITIC Real Estate and CITIC Pacific. As consideration, the Company will issue consideration shares to the CITIC Sellers, and also transfer a portfolio of the Company’s properties to the CITIC Sellers.
The initial consideration of the acquisition is RMB31,000 million (equivalent to HK$37,080 million), which shall be adjusted to the final consideration (provided that its amount is not more than 105% of the initial consideration and not less than 95% of the initial consideration) based on the valuations relating to CITIC Group. The final consideration which shall be settled by allotting and issuing 1,095,620,154 consideration shares at an issue price of HK$27.13 per consideration share to the CITIC Sellers, represents approximately 11.11% of the existing issued share capital of the Company and approximately 10.0% of the issued share capital of the Company as enlarged by the issue of the consideration shares. Concurrently, the Company will transfer certain property portfolios with a value of RMB6,149 million as part of the consideration.
The CITIC target group has a portfolio of property projects located in 25 cities across major economic regions in the PRC, with a total GFA of approximately 24 million sq.m. as at 31 December 2015. The projects are predominately located in the first and second tier cities, across major economic regions, namely Pan Bohai Rim, Yangtze River Delta, Pearl River Delta and other regions. After the completion of the transaction, it is expected that CITIC Limited will be the second largest shareholder of the Company and China State Construction Engineering Corporation Limited, through China Overseas Holdings Limited, will maintain a shareholding above 51% of the issued share capital of the Company, and thus remaining as the largest shareholder of the Company.
The land bank of the CITIC target group is mainly located in the major cities of the PRC, and thus will greatly supplement the Company’s existing property portfolio, which is also focused on first and second tier cities. As a result of the transaction, the Company will acquire a sizable property development land bank from CITIC Limited in one-go, without using existing cash outlay, while increase its exposure in land bank in first and second tier cities, reinforcing the Company’s position as a leading property developer in the PRC.
The property portfolio mainly comprises of properties for sale at various development stages, which is expected to provide a positive contribution to the cash flows and profitability of the Company, providing a solid foundation for the Company’s continuous growth under the 13th five-year plan. Now as ever, the Company will continue to focus on residential development, supplemented with the development and operation of commercial properties. The Company will, in accordance to business needs, continue to develop, hold and operate quality commercial properties.
This transaction highlights the ability of the Company to seize potential opportunities in the real estate market under industry consolidation backdrop. Going forward, the Company will continue to prudently assess acquisition opportunities, to reinforce and enhance its leading position in the PRC real estate industry. Through this transaction, CITIC Limited will become a strategic shareholder of the Company and CITIC Group will continue to benefit from the growth of the property market in PRC. The Company will work closely with CITIC Limited, leveraging on their respective strengths and expertise, to continue to capture investment opportunities.
Note: Details of the CITIC target group’s property portfolio are based on information provided by the CITIC sellers and has not been independently verified by the Company.
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