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Companies

Gordon Wu leads bid to take Hong Kong's Hopewell private

Stock price surges 30% after property tycoon makes offer

Under pressure from lenders to raise cash, Hopewell Holding's founder and chairman Gordon Wu, pictured in Hong Kong on August 7, began selling assets in 1994.   © Kyodo

HONG KONG -- Hopewell Holdings could soon end its 46-year journey as a public company in Hong Kong following a $2.7 billion offer from founder and chairman, Gordon Wu, to take the property and infrastructure company private.

The proposed privatization comes as residential property markets in Hong Kong and China slide on concerns about a regional slowdown. Weak markets had pushed Hopewell shares down by some 20% between Jan. 2 and Nov 20. Since then, however, they have risen steadily until Thursday's announcement when they shot up a further 30.6% to HK$34.55.

The offer price of HK$38.8 per share represented a 46.7% premium over its last traded price before the announcement.

An exit from the Hong Kong market will mark a new chapter for a company that has carried investors from 1970s China, when the economy was opening to foreign investment, to infrastructure projects in the 1990s in Pakistan and Indonesia.

Hopewell, founded in 1963, said in a filing submitted to the Hong Kong Stock Exchange on Wednesday that the founder-led consortium is offering to buy all 547.85 million outstanding shares -- or 63.1% -- of the equity it does not already own for a total of about 21.26 billion Hong Kong dollars ($2.7 billion).

The company said in the filing that the proposal offers an opportunity for its investors to "realize value at an attractive exit premium" amid market uncertainties and low turnover of its shares. It also said that the new projects it is developing require intensive multiple-year investments and could result in volatile operation performance after they are completed.

"Hopewell's controlling shareholders feel its shares are undervalued by investors," said Philip Zhong, an analyst at Morningstar Investment Management.

He said the company's valuation has always been "more compressed" compared with fellow developers in stock trading due to its relatively smaller size after a series of sell-offs. Weakness in Hong Kong property stocks meant it was "a good time to do a privatization," Zhong said.

Hopewell is one of the oldest developers in the former British colony and competed fiercely with Li Ka-shing's Cheung Kong Holdings, and the Kwok family's Sun Hung Kai Properties in the 1970s and 1980s to buy government land for development.

The company moved into the construction of highways in China in the late 1980s and subway lines in Thailand and power plants in the Philippines in the 1990s. But those projects stretched Hopewell's finances due to delays and cost overruns.

Under pressure from lenders to raise cash, Wu began selling assets in 1994. It sold most of its power interests to U.S. utility Southern Co. in two stages for $3.3 billion.

The Thai government canceled its $3.2 billion contract to build an elevated rail system and other infrastructure in Bangkok in 1997, leaving a mess of unfinished construction around the Thai capital.

Most recently, the company in April sold a two-thirds stake in its highway unit to an investment arm of the Shenzhen government for $9.87 billion.

Hopewell's biggest ongoing project involves the construction of a companion tower to Hopewell Centre, its headquarters and Hong Kong's first circular skyscraper.

Neighborhood opposition helped to delay the project for decades and forced the company to scale back its original plan for a 93-story hotel and office tower. Construction is now under way for a 55-story building with more than 1,000 hotel rooms.

While Wu never realized his vision for Hopewell to build a bridge across the Pearl River Delta from Hong Kong to Macau -- a project recently completed by the two cities' governments along with that of China -- his company did build the Humen Bridge further upriver in 1997, helped knit the area's transport network together.

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