Shanghai Industrial buys controlling stake in Neo-China

Chinese state-owned enterprise Shanghai Industrial Holdings is investing HK$2.746 billion ($353 million) for a 45% stake in Neo-China Land group, making it the controlling shareholder of the Hong Kong-listed company, which has been suspended from trading for two years.

Shanghai Industrial is acquiring 500 million existing Neo-China shares, representing 19% of the enlarged share capital, from controlling shareholder, Li Song Xiao, and subscribing to 684 million new shares that make up another 26%. Shanghai Industrial will pay HK$2.32 per share for both the old and new shares.

The deal follows only days after Singapore real estate developer CapitaLand agreed to pay $2.2 billion for the China real estate portfolio of Orient Overseas International. The circumstances surrounding the two deals differ dramatically, but they both point to the fact that the China real estate sector is likely to keep bankers busy this year.

Neo-China's Li, who resigned as chairman of the company in August last year, has undertaken to continue to own 21% of the expanded share capital. 

Neo-China currently has 14 property projects in 11 Chinese cities, including Beijing, Tianjin, Changsha and Xi'an. Most of the projects are middle to high-end residential properties. As of October 31, 2009, the company had a landbank of around 12.7 million square metres. The deal excludes one future development project, which is located in Zhuhai in Guangdong Province, and which will instead be bought by a company owned by Li.