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Hong Kong’s Third Richest Family Set to Seal NWS Takeover Deal

Henry Cheng Kar-shun

One of Hong Kong’s wealthiest families, led by billionaire Henry Cheng Kar-shun, is set to gain complete control of New World Development (NWD) infrastructure company NWS Holdings after NWD shareholders accepted a buyout deal to alleviate the developer’s debt burden on Thursday.

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NWD will earn HK$21.75 billion (US$2.8 billion) in cash from the sale of more than 2.38 billion NWS shares, accounting for about 60.86 percent of the issued shares, the firm reported.

According to the firm, a portion of the cash proceeds would be used to pay a special dividend of approximately HK$4 billion, or HK$1.59 per share.

The deal is expected to “generate immediate value for shareholders, repositions the company around its property businesses, and supports its broader efforts to reduce leverage in the expectation of persistently high interest rates” , according to the company.

“This transaction will streamline NWD’s business and asset portfolio, bringing its future earnings and cash flow profile into greater alignment with its property businesses.”

According to the announcement, if the NWS share offer is launched on November 9, NWD intends to receive the cash for the disposal by November 20 and to release the special dividend on December 20.

The clearance of the transaction “should help ease investors’ concerns about its (NWD) liquidity,” according to a report from CGS-CIMB Securities, which has a “buy” recommendation on the developer’s shares and a target share price of HK$19.30, representing a 26% upside from current levels. On Friday, NWD shares rose nearly 4% to HK$15.46. NWS Holdings increased by more than 1% to HK$9.41.

NWD, one of the city’s leading developers, has been battling to reduce its debts in the face of rising borrowing costs due to interest rate increases. In December, it announced the sale of the Pentahotel Hong Kong for HK$2 billion as part of a plan to sell HK$10 billion in noncore assets.

The Cheng family, through its investment vehicle Chow Tai Fook Enterprises, offered to buy around 95 percent of NWS shares in June.

As of Thursday, Chow Tai Fook Enterprises owned around 45.24 percent of NWD shares.

According to the company’s annual report, NWD’s total borrowings, including loans and bonds, stood at HK$185.3 billion at the end of June, while it had total cash of HK$54.5 billion.

According to its annual report released in September, its net profit fell 28% to HK$900.9 million in the fiscal year 2023.

According to a prior filing, NWD, one of Hong Kong’s most indebted developers, expects its net gearing of roughly 47% to reduce to around 42% after the sale. Its competitors average around 20%.

According to Forbes, the Cheng family’s net worth is US$28.9 billion, trailing Henderson Land heir Lee Shau-kee’s US$30.3 billion wealth and “Superman” Li Ka-shing’s US$39 billion fortune.

NWD sold more than 10 billion yuan (US$1.37 billion) in residential projects in mainland China in the first eight months of the year, propelling its China arm, New World China Land (NWCL), into the top 100 developers on the mainland, the firm announced in September.

In this time, the Greater Bay Area (GBA) and Yangtze River Delta markets generated 91% of NWCL’s income, a beneficial trend for its Hong Kong-based company, which has approximately 21% of its total assets deployed in the GBA development zone.

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