HONG KONG (Reuters) - Dalian Wanda Group's commercial property arm has snagged a $5.4 billion investment from a group led by tech giant Tencent Holdings (>> Tencent Holdings Ltd), one of the Chinese conglomerate's biggest deals aimed at easing financial strains and streamlining operations.
The 34 billion yuan deal for a 14 percent stake in Wanda Commercial could also help the unit get back on track with a plan to relist in Shanghai after a bold and ultimately expensive decision to withdraw from the Hong Kong exchange in 2016.
"From Wanda's perspective it seems a good deal. They've overextended with expansions and acquisitions over the last couple of years," said Ben Cavender, Shanghai-based principal at China Market Research Group, adding that Wanda Commercial had now become a more "attractive mainland IPO candidate".
The stake will be bought from existing investors who had been part of the $4.4 billion buyout fund created for Wanda Commercial's delisting in 2016. Those investors had been promised up to 12 percent annual interest if it failed to relist in Shanghai within two years.
The Shanghai IPO has, however, been held up by mainland regulatory measures to tighten liquidity in the real estate sector. Wanda said in a statement that with its new investors it was looking to take the unit public "as soon as possible".
The Tencent-led group includes major retailer Suning Commerce Group (>> Suning Commerce Group Co Ltd), e-commerce firm JD.com Inc (>> JD.com) and rival developer Sunac China (>> Sunac China Holdings Ltd), which bought some of Wanda's theme park assets last year.
"The tech companies are seen as the darlings of China's emergence as a global superpower. So, reputation-wise I think this is a good move for Wanda," Cavender said.
Wanda Group, along with a number of China's biggest conglomerates including HNA Group and Fosun International (>> Fosun International Limited) - has seen higher levels of scrutiny on its finances and debt over the past year as Beijing clamps down on what it sees as "irrational" overseas acquisitions.
Wanda Commercial, in particular, has been facing major issues with cashflow, with billions of dollars of loans due for repayment this year. Fitch Ratings this month downgraded the property firm by two notches to a junk rating, citing its inability to access offshore funding channels to boost its liquidity in a timely manner.
This week's deal follows a $9 billion sale of domestic hotels and tourism assets, including 13 theme parks, to Sunac and Guangzhou R&F Properties (>> Guangzhou R&F Properties Co Ltd) last year.
The conglomerate also said on Monday it expects to gain about $1.3 billion from the sale of London, Sydney and Gold Coast property developments. Its Hong Kong-listed unit Wanda Hotel (>> Wanda Hotel Development Co Ltd) jumped as much as 52 percent on Tuesday on the news.
In addition, Wanda Commercial will be renamed "Wanda Commercial Management Group", and aim to complete previously earmarked asset sales in the next one to two years.
"Going forward, it will stop engaging in property development and will transform into a company solely focused on commercial management," Wanda Group said.
On Tuesday, Wanda said it would set up a new property unit this year to develop projects such as shopping malls. The group announced this month it plans to open 50 new malls this year, adding to the 235 in its portfolio.
Suning and Sunac said separately they would each invest 9.5 billion yuan for a 3.91 percent stake in Wanda Commercial.
(Reporting by Clare Jim; Additional reporting by Donny Kwok; Writing by Adam Jourdan; Editing by Edwina Gibbs)
By Clare Jim