January 30, 2018 / 7:45 AM / 7 months ago

Breakingviews - Chinese angels keep Wanda's IPO dream alive

HONG KONG (Reuters Breakingviews) - China’s tech giants are keeping tycoon Wang Jianlin’s relisting dream alive. A consortium led by Tencent will pay $5.4 billion for a stake in Dalian Wanda Group’s indebted property arm. The investment buys Wang time to execute a promised Shanghai relisting, and the new alliance could help clear regulatory hurdles too. What the new backers will get out of it is less clear.

A JD.com sign is seen during the fourth World Internet Conference in Wuzhen, Zhejiang province, China, December 4, 2017. REUTERS/Aly Song

In a deal announced late Monday, a heavy-hitting group that also includes e-commerce firm JD, retailer Suning Commerce and property developer Sunac will take a 14 percent stake in Wanda Commercial Properties. The sellers are investors who in 2016 helped fund the unit’s $4.4 billion take-private transaction in Hong Kong. At the time, Wang promised them up to 12 percent annual interest if Wanda Commercial did not relist in Shanghai within two years, Reuters reported. But the return to onshore markets has been delayed as the broader group moves to shore up its finances. Pressure on the unit is mounting: Wanda Commercial has to make a $510 million loan repayment in March, come up with a further $1 billion by May, and then clear $600 million in offshore notes due in November.

This deal is a big relief. By convincing these new backers to buy out the take-private investor group at a premium, Wang is now off the hook to make the September re-listing deadline, according to someone familiar with the deal. At the same time, Wanda Commercial says it will exit property development, a sector recently unpopular with regulators trying to rein in corporate leverage levels. Now the unit can rebrand itself as a “new consumption” -style mall operator that marries bricks-and-mortar commerce with online shopping.

Less clear is what Wang’s new investors will get in exchange. Suning and Sunac already have business relationships with Wanda, which this deal may smooth. For Tencent, better access to Wanda’s retail tenants might help its mobile payments service catch up with rival Ant Financial. JD may benefit from selling offline too. Even so, a minority stake in an anxious property group seems more generous than strategic.

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