In 2021, the super large-scale acquisition and merger of the property industry will be initiated by the leading material enterprises.
On the evening of February 25, Blu ray development (600466, SH) and Country Garden Services (02606, HK) successively announced the details of the acquisition of Blu ray Garbo equity. Maybe it is too much expectation and speculation given to the market, and the final transaction volume is slightly lower than the market expectation – Country Garden Services plans to purchase 64.62% shares of Blu ray Garbo services with RMB 4.846 billion in cash.
Even so, this leading property listed company’s equity acquisition of another property listed company is still a blockbuster in the current hot property industry. Perhaps, this will open a new round of the era of material and enterprise integration.
However, for this transaction, the capital market reaction is different. After the resumption of trading in the morning of February 26, the share price of country garden services declined. By the end of the day, the share price was HK $63.8 per share, down by 4.78%. After the resumption of trading, the share price of another trading entity, Blu ray Garbo services, continued to rise sharply, and finally closed with an increase of HK $19.26% and HK $46.45 per share, the highest increase since its listing.
Screenshot of country garden service announcement
About 30% premium, or trigger a general offer
On the evening of February 25, Blu ray development (600466, SH) announced the transfer of its subsidiary. On February 23, 2021, the company and its wholly-owned subsidiary, Blu ray Hejun, signed an agreement with the transferee, Country Garden Property Hong Kong. Country Garden Property Hong Kong plans to acquire 64.6203% of Blu ray Jiabao service’s shares held by Blu ray Hejun in cash. The total transaction cost is temporarily estimated at RMB 4.846 billion (the formal agreement signed shall prevail).
It is worth mentioning that during the suspension period of Blu ray Garbo service and country garden service, there was a popular saying in the industry that country garden service “intends to purchase 75% equity of Blu ray Garbo for 10 billion yuan”. According to this, the overall valuation of the acquisition is about 13.3 billion yuan, which also improves the expectation of the market and investors.
According to the announcement, Blu ray Hejun holds about 116 million shares of Blu ray Garbo services, including H shares and domestic shares, accounting for about 65.04% of the total equity of Blu ray Garbo services. The subject matter of this transaction is that Blu ray Hejun legally holds 64.6203% shares of Blu ray Garbo services (excluding 0.4211% of its domestic shares).
Based on the acquisition of 64.62% of the shares at RMB 4.846 billion, the overall valuation of the acquisition is about RMB 7.5 billion, equivalent to about HK $9 billion, which is about 30.57% higher than that of the suspension of Blu ray Garbo services.
For this transaction, Blu ray development believes that it is “conducive to increasing the company’s cash flow and promoting the operation and expansion of the company’s core business”. In terms of country garden’s service, it is to “develop new opportunities of property management and build an absolute industry leader”.
The acquisition of 64.62% of the shares will also trigger a comprehensive tender offer. Therefore, it will take time for the transaction between the two sides to be finally implemented. Country Garden Services pointed out that the detailed terms of the possible transaction have yet to be negotiated and implemented, and the two sides have not yet concluded a final binding agreement.
The market reaction is different, both sides of the transaction fall and rise
As the first Hong Kong listed property company in Western China, Blu ray Garbo service ranks 11th in the top 100 property service companies in China in 2020. As of the close of February 22, Blu ray Garbo closed at HK $38.95 per share, with a total market value of about HK $6.893 billion.
It is worth noting that, according to incomplete statistics, Blu ray Garbo services spent about 759 million yuan in 2020 to implement the largest number of 17 property enterprise mergers and acquisitions in the year, expanding the area under management to 130 million square meters by the end of 2020, and increasing the contract area to 210 million square meters. Just before this transaction, Blu ray Jiabao has just acquired 100% equity of Sichuan Mingrui Property Management Co., Ltd.
Like Blu ray Garbo service, country garden service is also a star enterprise in the property M & a market. According to the statistics of China Association for research and development, in 2020, Country Garden Services invested the largest annual amount of M & A, totaling 4.445 billion yuan. In the first half of 2020, country garden services acquired more than 6 million square meters of management area through acquisition and merger.
After the acquisition of Blu ray Garbo services, the total area under management of country garden services will reach 540 million square meters, which will be close to the 578 million square meters under management of all things cloud, the “brother of property management” of Kerry statistics; the contract area will be 956 million square meters, which will exceed 680 million square meters of all things cloud.
article links：Opening the era of material and enterprise integration
Reprint indicated source：Spark Global Limited information