(Yicai Global) July 20 -- Guangzhou R&F Properties Co. [HKG:2777] crashed Dalian Wanda Commercial Properties Co.'s [HKG:3699] and Sunac China Holdings' [HKG:01918] signing ceremony. A USD9.34 billion (CNY63.17 billion) tie-up between Wanda and Sunac turned into a three-way deal worth USD9.42 billion (CNY63.75 billion).
The firms concluded a tripartite strategic cooperation agreement in Beijing yesterday. Wanda Commercial Properties will transfer its 77 hotels including Wanda Realm Beijing to R&F Properties for CNY19.91 billion, and will transfer 91 percent equity of 13 cultural tourism projects including ones in Xishuangbanna and Nanchang to Sunac Real Estate Group Co. for CNY43.84 billon.
Based on the agreement, the management contracts for the 77 Wanda Commercial Properties hotels that R&F Properties is to acquire will remain valid until their expiration. Sunac Real Estate Group will assume responsibility for about CNY45.4 billion in existing loans associated with the cultural tourism projects.
Sunac Real Estate Group and R&F Properties said they will consider entrusting Wanda Commercial Properties and Wanda Cinema Line Corp. [SHE:002739] with management duties on commercial center and cinemas they back in the future. The tripartite pact's signatories agreed to carry out a comprehensive strategic cooperation in the fields of cultural tourism projects and movies.
The transaction's details are different from those in the framework agreement disclosed by Sunac and Wanda on July 10. R&F Properties was added to the mix, the transaction price increased and payment methods were changed. Wanda was originally slated to provide a loan to Sunac, but this clause was removed.
Sunac agreed to cough up CNY15 billion on the signing date, and the pay off the rest within 90 days of signing to settle the transaction (individual items should be handled when settlement condition allows). R&F Properties is set to make a CNY2 billion down payment within two days of the signing, and pay off the remainder before January 31, 2018.
Under the framework agreement Sunac and Wanda reached on July 10, Wanda was set to issue a CNY29.6 billion three-year loan to Sunac through a designated bank. Sunac had agreed to pay CNY29.6 billion to Wanda within two days of receiving the loan, and was set to purchase 76 hotels including Wanda Realm Beijing and Wanda Reign Wuhan for CNY33.6 billion.
Whether it is from corporate strategy or business logic, the three parties are the winners of this cooperation, Wanda Group Chairman Wang Jianlin said yesterday. "Through this transfer, the three parties significantly reduced their liabilities and recovered huge amounts of cash."
"Sunac purchased 13 cultural tourism projects from Wanda, and Wanda sold the assets of 77 hotels to R&F," said Sunac Group Chairman Sun Hongbin. "For Sunac, such an adjustment has a better liquidity than the original trading program, as it lowered the level of Sunac's debt and took a discount on the original hotel transaction price. It is also an acceptable premium for the asset package of the cultural tourism projects, which is satisfactory to all three parties."
The deal was a quick decision that took about one week, leading to a mutually beneficial result, R&F Properties Chairman Li Silian said in a media interview yesterday. "Wanda accelerated its rate of money collection," Li said. "Chairman Sun didn't need to set up another hotel management team, and R&F suddenly became the owner of the biggest set of hotel assets in the country and the world."
"A five-star hotel can cost as much as CNY1 billion for a single project," Hotelsolution Consulting Chief Knowledge Office Zhao Huanyan told Yicai Global. "Even if there was some depreciation, most of these 77 hotels are high-end, and each one's project price should have been no less than CNY400 million to CNY500 million. It was reasonable for Sunac to take over these hotels at an average price of more than CNY400 million for each originally. Now the price of a single hotel is less than CNY300 million -- very cost-effective for R&F."
On the day of signing, the strategic cooperation signing ceremony that was scheduled for 4.00 p.m. was postponed for an hour, and reporters were asked to leave temporarily. At that time, a background board at the venue read, "Strategic Cooperation Signing Ceremony Between Wanda Commercial, Sunac China and R&F."
Shortly thereafter, the media said they saw from the door that the backdrop had been replaced with one that said, "Strategic Cooperation Signing Ceremony Between Wanda Group and Sunac China," indicating that R&F may have gotten cold feet. Reporters were asked to reenter the venue around 5.30 p.m. The background board being displayed at that time listed all three enterprises.