Fosun threatens to preempt SOHO's latest Shanghai deal

HONG KONG (Dec 30): Chinese conglomerate Fosun Ltd said on Friday that it was surprised by SOHO China Ltd's RMB4 billion (RM2.01 billion) acquisition of a stake in a Shanghai property project in which it holds a 50% interest, and believes it has the right to preempt the deal.

International Commercial property developer SOHO China said on Thursday that it would purchase a 50% stake in the project from Greentown China Holdings Ltd and other domestic companies for RMB4 billion.

In a filing to the Hong Kong stock exchange on Friday, Guo Guangchang, chairman of privately controlled Fosun, said the company was "surprised in relation to the proposed arrangements" as stated in SOHO's statement released on Thursday.

"The company... is of the view that it enjoys the pre-emptive right in the proposed transfer," Guo said.

"If such interest cannot be protected, the company shall take all appropriate legal actions to defend its interest," he said, without elaborating.

Fosun shares were up 0.25% at midday on Friday.

The Shanghai project is a commercial property development in the city's historic Bund district for mixed office, retail, financial and cultural use. Upon completion, the 45,472-sq m site will have an above-ground gross floor area of 271,529 sq m and an additional 151,296 sq m of underground space.

If successful, the deal will be SOHO China's seventh and largest acquisition in Shanghai this year. The company, led by high-profile businessman Pan Shiyi, was originally focused on Beijing and began investing in Shanghai more than two years ago.

"(The Shanghai deal) has problem in its procedure," a Fosun spokeswoman in Shanghai said, adding that the company reserved the right to take legal action. She declined to comment further.

Officials at SOHO, Greentown, and the other two companies selling their interests in the project — Shanghai Zhendai Property Ltd and Shanghai Panshi Investment Management Co Ltd — were not immediately available for comment.

Greentown holds a 10% stake in the project, while Zhendai and Panshi own 35% and 5%, respectively.

Greentown said it would receive RMB1.04 billion in proceeds from the sale, which would "improve the gearing level and strengthen the financial position of the group."

Shares of Greentown have fallen about 60% in the past 12 months amid investor concern about the impact of a relentless government crackdown on property speculation and its ability to access funding.

Greentown has vowed to slash its net gearing ratio to below 100% in two to three years as it refrains from buying land to focus on property sales.

The firm had net gearing of 163% at the end of June, up from 132% at the end of 2010, making it the most highly-geared Chinese property developer listed in Hong Kong.

Analysts said they expected more similar deals ahead as cash-strapped smaller Chinese developers are forced to sell down their portfolios amid a credit clampdown.

"There are still a lot of opportunities there as market liquidity remains tight," SOHO president Yan Yan said at a conference call late on Thursday. "We will take this weak market condition and our favourable cash position to capture any potential acquisition opportunities." — Reuters