Road King Infrastructure Limited, a Hong Kong-listed company, acquired a further 39.74 percent of Beijing-based Sunco Property for 1.3 billion yuan after buying a 55 percent stake in the firm last September, Sunco confirmed yesterday.
"We've signed a deal with Road King, under which Road King will take over 94.74 percent of Sunco's shares when all the agreed options are cashed in," said Yang Sen, head of Sunco's public relations division.
Sun Hongbin, the founder of Sunco, will retain the remaining 5.26 percent stake.
As one of the country's largest property developers, Sunco suffered from a cash-flow shortage due to the overly rapid expansion of the property sector and tightened policies.
"It is too aggressive for a 1 billion yuan company to develop over 7 million square meters at the same time, especially when the government began to rein in the overheating sector and made developers' financing more difficult," said an analyst who declined to be named.
Sunco sold a 55 percent stake to Road King last September for 1.27 billion yuan.
Road King's core business is the investment, development and management of toll roads and bridges in China. The firm entered China's property market in 2004. Its real estate projects have reached a total floor area of 1.6 million square meters.
After acquiring Sunco, Road King will expand its China property business to over 16 cities, covering 39 projects with a construction area of 12.5 million square meters.
"Due to the huge potential of China's real estate sector, the board decided to quicken our property business development on the mainland, which is another cash cow for the company," said Zen Weipao, chairman of Road King, adding that the acquisition of Sunco was likely to bring substantial rewards to its shareholders.
According to Wang Hao, chief executive officer of Sunco Property, Road King's steady cash flow and management expertise will strengthen Sunco's competitiveness.
But some experts said Sunco was sold for too little. "It is hard to imagine that Road King could take over such a big enterprise for a mere 2.58 billion yuan," said an industry insider.
(China Daily January 30, 2007)