Chow Tai Fook Enterprises Ltd., the private family office of billionaire Henry Cheng, will keep NWS Holdings Ltd. listed on Hong Kong’s stock exchange after its buyout of the majority stake is finalized, clearing up uncertainty among investors about the future of the infrastructure firm.
(Bloomberg) — Chow Tai Fook Enterprises Ltd., the private family office of billionaire Henry Cheng, will keep NWS Holdings Ltd. listed on Hong Kong’s stock exchange after its buyout of the majority stake is finalized, clearing up uncertainty among investors about the future of the infrastructure firm.
Chow Tai Fook will not exercise the option to acquire all the outstanding shares of NWS, which is a unit of the Cheng family’s property-to-retail conglomerate New World Development Co. If the public float of NWS falls below 25% following the close of the deal, “appropriate steps will be taken” to ensure it’s maintained at a level that will see the firm remain listed, it said in a stock exchange filing Thursday.
The private family office announced in June it would buy the NWS shares it doesn’t already own in a HK$35.5 billion ($4.5 billion) deal that would help inject capital into New World, one of the most leveraged property developers in Hong Kong. New World Development, which owns a a majority stake in NWS, stands to receive about HK$21.8 billion from the disposal.
The clarification that Chow Tai Fook doesn’t plan to take the infrastructure firm private signals its intention to lower debt for the Cheng family’s flagship conglomerate at a time of rising interest rates. Providing the group with additional liquidity is also key to boosting investor confidence, which has been hurt by a real estate slump in mainland China that threatens to ripple across the country’s financial system.
Chow Tai Fook’s support could lower New World’s net-debt-to-total-equity ratio to 42% from 47% and help the developer avoid being rushed into selling its non-core assets at distressed prices to raise cash, according to Bloomberg Intelligence analysts including Patrick Wong.
The move to keep NWS listed may also eliminate the possibility that the deal could be rejected by minority shareholders, some of whom may have been concerned that the offer price wasn’t high enough for a deal in which it would be taken private or that they would lose their dividend payment, said Morningstar analyst Jeff Zhang.
New World Development, which had led an earlier bond rout among Hong Kong’s builders, saw its dollar bonds rebound on Friday. Its 6.15% perpetual note added another 2.3 cents on the dollar as of 1:40 p.m. Friday, and is on track for the largest weekly gain since November, according to Bloomberg-compiled prices. Despite the gains, New World’s perpetual notes are still in distressed territory.
Shares in Hong Kong weren’t trading Friday, with the stock market shut due to a typhoon.
–With assistance from Dorothy Ma and Jeanny Yu.
(Corrects name of firm in sixth paragraph in story published Sept. 1)
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