Cofco to list commercial property business in HK via reverse takeover

Will cost the company US$1.8 billion.

State-owned Chinese conglomerate Cofco has set in motion a reverse takeover bid that will result in a Hong Kong listing for its commercial property business in mainland China.

Cofco said it plans to inject the assets of 12 property projects in cities across China into the Hong Kong Parkview Group, one of its subsidiaries listed in Hong Kong. The properties include hotels, offices, apartments and shopping malls. Cofco’s other operations are slaughtering livestock and selling life insurance

In exchange, Parkview will issue new shares equivalent to 19 times the number of shares it currently has outstanding. The complex deal calls for Parkview to be renamed Cofco Land.

Cofco will wind-up holding 75% of Cofco Land after the reverse takeover, while public shareholders who did not buy into the new share sale will find their current 30% stake in Parkview reduced to 2 percent of Cofco Land.

Reverse takeovers involve injecting privately held assets into a target company that is already listed, usually in exchange for new shares that give the seller of the assets a controlling stake in the listed company.

They are a popular option among Chinese property developers, who often struggle to secure bank funding and whose boom-and-bust earnings cycles can make an outright IPO more difficult. In Hong Kong, reverse takeovers are approved by Hong Kong Exchanges and Clearing Ltd as if they were IPOs.