Evergrande has called off plans for a multibillion-dollar deal for its property management unit, worsening its cash crunch as the Chinese real estate giant teeters on the brink of collapse.
The company announced late Wednesday that it had terminated an agreement to sell a controlling stake of Evergrande Property Services to rival Chinese developer, Hopson, for about 20 billion Hong Kong dollars (roughly $2.6 billion). The deal, which was announced earlier this month, was scuppered after Evergrande “had reason to believe … that the purchaser had not met the prerequisite to make a general offer for shares in Evergrande Property Services,” the conglomerate said in a stock exchange filing.
Hopson, in its own statement, has said that it “does not accept that there is any substance whatsoever” to Evergrande’s cancellation of the sale. “Until now,” Hopson had been “prepared to complete the sale … in accordance with the agreement,” it said Wednesday. But Hopson added that “other parties” had wanted to change the agreed terms of the deal, including terms of payment, which it found “unacceptable.” Shares of both companies, which had been suspended from trading since the potential deal was announced, resumed trade Thursday in Hong Kong. Evergrande plummeted nearly 11%, while Hopson surged 5.2%.
Evergrande, one of China’s largest real estate developers, is currently buckling under a mountain of debt, with more than $300 billion worth of liabilities. Its shares have crashed some 80% this year. In recent weeks, the company has been trying to resolve its cash flow issues by attempting to sell some of its assets, such as partial stakes in its electric vehicle and property services businesses, as well as an office tower in Hong Kong. But the company hasn’t had much luck in its search for buyers.
