Dalian Wanda shareholders approve take-private

Victory for Chinese tycoon Wang Jianlin as shareholders give him green light to take commercial property unit off Hong Kong bourse before relisting on the mainland.

Chinese billionaire Wang Jianlin's plan to relist his property empire on the mainland has cleared its biggest hurdle, with shareholders in Hong Kong-listed Dalian Wanda Commercial Properties approving Wang's application to delist.

Wang believes he can secure a higher valuation for the shopping mall developer in the domestic market, after disappointing trading and mediocre share performance since the December 2014 Hong Kong IPO. The delisting will be a blow to the Hong Kong bourse, costing it one of its biggest and most liquid stocks and potentially kicking off a wave of similar delistings.

Ahead of a shareholder meeting on Monday, the question of whether the tycoon could secure the required level of support – yes votes from holders of 75% of independent H-shares, with no more than 10% actively voting 'no' – was anyone's guess.

Support from global asset managers include APG Asset Management and BlackRock, which between them hold a shade over 10% of independent H-shares, had been in some doubt – though the company had received votes of confidence from key shareholders including China Life Insurance and Kuwait Investment Authority.

But in the end it was a success for Wang, who secured approval from holders of 88.5% of independent shares who agreed to sell their shares at HK$52.8 each. Although 7.3% of independent shareholders voted against the proposal, it was less than the 10% vote required to block the entire transaction.

Since the buyout is made in the form of a general offer, Wang is not obliged to purchase from shareholders that choose not to tender their shares. Those who decline the tender offer will be left with unlisted Dalian Wanda shares.

It will cost Wang $4.4 billion to buy back the entire 14.4% interest from independent shareholders.

Now Wang will have a little more than two years to fulfil its plan to take the property assets back to list on either the Shanghai or Shenzhen exchange, having agreed to complete the relisting by the end of August 2018.

If Dalian Wanda is unable to relist by August 2018, the tycoon will pay an annual dividend of 12% to domestic and 10% to foreign institutions who financially backed the delisting proposal.

While Wang and majority of Dalian Wanda shareholders should be pleased with the outcome, the Hong Kong Stock Exchange (HKEx) will have every reason to be concerned.

Besides the fact that the $4.4 billion transaction is the largest-ever buyout of a Hong Kong-listed company, the delisting will also cost the Hong Kong bourse one of its biggest and most liquid stocks.

With a market capitalisation of $29.7 billion, Dalian Wanda Commercial Properties is the 15th largest listed company in Hong Kong and the third largest property developer after Sun Hung Kai Properties and China Overseas Land & Investment. It is also one of the most-traded stocks, with average three- month daily turnover of about $20 million.

The loss of Dalian Wanda is a blow to HKEx’s trading revenue and also undermines the bourse’s status as Asia’s top exchange. Market watchers are now turning their attention to other mainland Chinese companies which may follow in Dalian Wanda's footsteps.

Chinese sportswear retailer Peak Sport Products and mobile phone manufacturer TCL Communication Technology are tipped to be among the next Hong Kong-listed firms to adopt the delisting and relisting strategy, after founders of both companies officially made take-private bids last month.

Other Hong Kong-listed red-chip companies including furniture retailer Red Star Macalline and real estate developer Guangzhou R&F are also likely candidates to make similar moves.

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