Exclusive: Wanda Commercial buyout offer delayed by regulator's queries - sources

By Clare Jim

HONG KONG (Reuters) - A plan by China's richest man, Wang Jianlin, to take his Hong Kong-listed commercial property unit private is being held up by questions from the city's market regulator, according to company insiders, delaying an announcement on the offer.

Dalian Wanda Commercial Properties (HK:3699), whose shares have been halted since April 25, was expected to publish details of the proposed delisting as early as May 2, said two of the sources with direct knowledge of the plan. They declined to be named as details of the discussions were private. Wang is planning to delist the Hong Kong real estate vehicle and then relist it in Shanghai, hoping to benefit from higher valuations seen on the mainland. The nature of the questions the Securities and Futures Commission (SFC) has for the Dalian Wanda Group, the parent of the property unit, and why there was such a delay, were unclear.

The SFC declined to comment.

Wanda Commercial also declined to comment.

It is not unusual for the SFC to question companies before they delist as buyout offers need regulatory approval. One person familiar with the situation said, though, that the way the buyout had been structured was rare in Hong Kong and this was causing regulatory headaches. Dalian Wanda has set up a special vehicle to buy all the shares of the property unit. Investors who wish to own shares in the future mainland-listed company have subscribed for shares in the vehicle in an offer that has been oversubscribed.

They will receive up to 12 percent annual interest on their holdings if the property arm fails to relist in China within two years.

Meanwhile, it is unclear what investors in the current Hong Kong-listed entity will get.

According to an announcement late in March from Wanda Commercial, Dalian Wanda Group was preparing to offer a minimum of HK$48 a share, the same as the original IPO price in December 2014. But a source told Reuters earlier this month that Dalian Wanda was considering offering a 10-20 percent premium on the IPO price in a bid to secure shareholder approval.

LACK OF COMMUNICATION

Some cornerstone investors in Wanda Commercial's $4 billion Hong Kong IPO said they fear they are being treated unfairly in the buyout plan compared with investors who have been wooed to bet on the company's relisting in China.

Cornerstone investors in IPOs receive guaranteed allocation in exchange for agreeing to retain their stakes for a set amount of time, typically six months.

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"They haven't come to talk to us at all since the delisting announcement," Timing Investment Chairman Jiang Ming told Reuters in a phone interview. The firm, which invests in media, construction and finance, bought $100 million worth of Wanda Commercial shares as a cornerstone investor in the IPO. Jiang said it is "a little unfair" for Dalian Wanda to offer new investors the high yields while investors who had supported the company since the start were ignored. He added Timing would approve the delisting if it was offered a premium of at least 15 percent above the IPO price."Cornerstones were shocked and they couldn't comprehend the delisting. They trusted the company's strategy, but now it's changed. This relationship is changed," one of the company insiders said. Major cornerstone investors in the IPO included Kuwait Investment Authority (KIA), Och-Ziff Capital Management (N:OZM) and Dutch pension fund manager APG. KIA and APG declined to comment on the delisting when contacted by Reuters, while Och-Ziff didn't immediately reply to a request for comment. "Cornerstones went in at HK$48, while many hedge funds went in at HK$30 plus (after the listing). Everyone has a different view of what the company is worth, and the group did itself no favor when they went out pitching to new investors promising them an eventual listing would be at three times the earnings multiple," said a Singapore-based hedge fund manager, whose clients hold around 3 percent of Wanda Commercial. The hedge fund manager said the shares were bought before the take-private announcement, and he will likely accept the offer if it comes in at 10 percent or more above the IPO price. Inside the company there is far from universal agreement about the plan. One of the insider sources said: "There's no guarantee of higher valuation in (China) but then you're delisting from Hong Kong. There's a big risk involved and it may damage your reputation."