Sunac China Holdings's planned $9.3 billion deal to buy Dalian Wanda's tourism projects and hotels is a bargain even though it could become China's most indebted developer, analysts said, a view that sent Sunac shares up almost 14 percent on Tuesday.
The surprise sale gives Wanda possible revenue to pay down debt that has soared during an aggressive expansion into entertainment, tourism and other consumer businesses.
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Sunac China is a major residential developer based in the northern city of Tianjin.
Developers spent a record 96.7 billion yuan ($14 billion) in the second quarter on acquiring competitors or their assets, according to data compiled by Bloomberg.
Wanda, headed by one of China's richest men, Wang Jianlin, was among the more acquisitive players in a flood of Chinese money overseas that raised concerns in Beijing over "irrational" investments.
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Dalian Wanda has not explained its thinking behind the sale, but the firm is heavily in debt. Another downgrade would push the rating into "junk" category. "Wanda Commercial plans to repay most of the bank loans this year", Wang told Caixin. Leaked agreements with creditors showed that Wanda agreed to buy back the shares at a premium price - equal to an 8 and 10 per cent annual return for domestic and overseas investors - if the relisting plan failed two years later.
"This cooperation will add a large number of prime land reserves and property assets for the company at a reasonable cost, and will provide strong support for sustainable and healthy development of the company in the future", Sunac China said. It has also been very active globally, buying USA cinema chain operator AMC Entertainment Holdings and taking a controlling stake in United States film studio Legendary Entertainment a year ago.
Trading in Sunac China shares had been suspended on the Hong Kong stock market following the company's announcement on Monday morning that it was considering an important acquisition-related information disclosure.
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