- Mar 08, 2013
- Following Chinese Government’s new initiatives for urbanization, the alliance with China Development Bank Capital marks a key milestone for the Compan
A Memorandum of Understanding (the “MOU”) was signed by China Development Bank International Holdings (“CDBIH”), a wholly owned subsidiary of China Development Bank Capital Corporation Ltd. (“CDBC”) and the Company regarding possible subscription of shares of the Company on 18 March 2013.
According to the MOU, CDBIH would subscribe for 3 billion new common shares issued by the Company at the subscription price of HKD 0.246 per share, and would become the controlling shareholder of the Company with 40.01% effective interest in the enlarged capital of the Company after the subscription. At the same time, the current controlling shareholder, SRE Investment Holding Limited (“SREI”) would continue to hold an effective interest of 19.58% in the enlarged capital and would remain a substantial shareholder of the Company. In addition, the subsequent composition and size of the board of directors of the Company were to be further determined upon by the parties entering into the MOU.
Mr. Shi Jian, Chairman and Executive Director of the Company expressed his optimism: “The foundation of this important strategic relationship with CDBC is based upon our common vision on the future of China’s urbanization, and our common goal of contributing to this important and multi-decade development trend of the country. In considering the possibility of introducing CDBIH as our controlling shareholder, we have been eying on the enormous development potential and business prospects in relation to China’s urbanization trend. Thanks to the proactive support of CDBC on China’s urbanization in the past, CDBC has established a portfolio of investment and financing in urbanization projects around the country, while we have established a professional operating and management team through over a decade of development experience – we shall complement each other and create substantial synergies.”
The new generation of leaders in China have been repeatedly emphasizing the urbanization of the country is the backbone of the future growth and reformation of the national economy, and promoting urbanization is thus a key long term national policy. As promoting the seamless integration of urbanization and industrialization, as well as that of cultural modernization and information technology advancement were highlighted as the core future strategic directions by the Communist Party Summit, it is imperative to use urbanization as a powerful engine to stimulate domestic consumption and pace up structural reformation of the national economy. The urban population of China is expected to grow at a pace of over ten million per year, representing the urbanization rate to climb from its current level of 51% to match the level of other developed countries at around 70%-80% for decades to come. This represents exciting growth potential and opportunities.
In addition, Mr. Stan Yue, Vice Chairman and Executive Director of the Company, pointed out that the proposed investment was set to significantly improve the capital structure and credit profile of the Company: “Since new town development is capital intensive with substantial initial capital outlay, the Company has been constrained to adopt a relatively conservative approach, our CAPEX was funded throughout the operation cycles (i.e. funding from capital, bank borrowings and proceeds generated from operation).”
“Introducing of CDBIH as our controlling shareholder will help to greatly enhance the credit rating of the Company and strengthen corporate finance capabilities, thereby laying a foundation for rapid growth.” Mr. Yue added in confidence.
It was also disclosed in the MOU that, within 12 months of the closing the share subscription arrangement, SREI undertakes to purchase from the Company, and the Company undertaked to dispose of, non-principal business assets within the group, defined as non-land development assets. The consideration of the purchase agreement would be the higher of the prevailing book value and the value of the Non-Principal Business Assets as determined by an independent valuer agreed to be appointed by the Company, SREI and CDBIH.
About China Development Bank Capital Corporation Ltd.
As a leading bank specialized in financing mid to long term projects, China Development Bank (“CDB”) has made remarkable contribution to China’s urban, social and economic development through committed town infrastructure construction loans around the country since 1998. Through this, CDB has established close relationship with local governments across the country, and developed a strong team of experts in township development, with a particular focus on promoting integrated coordination, better planning and sustainability of urbanization.
China Development Bank Capital (“CDBC”), the largest professional investment institute in the field of urbanization in China, is a wholly owned subsidiary of CDB established following the State Council’s reform initiatives. With a registered capital of RMB 47.6 billion, CDBC is currently the only authorized institute within the Chinese banking sector to engage in RMB-denominated investments, and is thus a unique integrated investment platform covering both domestic and offshore markets.
CDBC does not only seek to be a capital provider in the new town development process, but also through pioneering in new town development philosophy, development models and products, become a leading player in China’s urbanization. The strategic investment in the Company marked an important step for CDBC in achieving this goal.