PAG to buy 51% stake in Evergrande Property Services for US$509.8 million

ASIA-FOCUSED investment firm PAG will acquire a 51 per cent stake in Evergrande Property Services Group, a unit of debt-laden developer China Evergrande Group, for HK$4 billion (US$509.8 million), the two said in a joint announcement on Friday (Oct 30).

The acquisition marks a major step in liquidators’ efforts to sell assets and recover funds for creditors of China Evergrande, which received a combined US$46 billion in creditor claims. Reuters reported in early October that PAG was in exclusive talks with the liquidators to buy a stake in the services unit.

The sale follows a competitive auction run by the liquidators, according to the announcement. PAG will be required to make an unconditional offer for the remaining 5.3 billion shares in Evergrande Property after taking control of the company, the filing said.

At HK$0.8359 each, a 29 per cent discount to Evergrande Property’s closing price on Wednesday, the offer values the unit at about HK$9 billion, compared to a market capitalisation of roughly HK$11.1 billion after its shares dropped to HK$1.025 on Friday.

The stock was suspended on Thursday pending the announcement, and dropped 13.5 per cent after trading resumed.

PAG said in the filing that Evergrande Property generated stable, recurring revenue from a diversified portfolio of managed properties across China.

It said taking control of the listed services unit would remove uncertainty tied to the liquidation of China Evergrande and CEG Holdings, and could strengthen market confidence.

PAG will fund the acquisition and the offer, if fully accepted, with acquisition financing and equity committed by PAG Fund IV, the filing said.

PAG will also pay 500 million yuan (US$75 million) at completion for certain taxes, transaction fees and other liabilities of CEG, according to the filing.

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Goldman Sachs is advising PAG on the acquisition and potential mandatory offer, while UBS and Citic Securities are joint financial advisers to China Evergrande and CEG.

The deal remains subject to Chinese antitrust approval, among other conditions. The parties can terminate the agreement if these conditions are not met or waived by Feb 12, 2027, according to the filing.

China Evergrande, once China’s premier property developer, defaulted on most of its US$300 billion in liabilities following Beijing’s sweeping crackdown on the property sector six years ago.

The liquidators of China Evergrande and CEG informed Evergrande Property a year ago that they were seeking ‌to sell the 51.016 per cent stake, according to the filing.

Evergrande Property manages homes sold by China Evergrande Group and other developers, but after the deal is closed, it will cease all ties with its parent and be independently run, said a person with knowledge of the situation.

PAG declined to comment further than the filing, and Evergrande Property did not immediately respond to a Reuters query for comment.

PAG intends to keep Evergrande Property listed in Hong Kong and does not plan major changes to its operations or workforce, apart from nominating new directors at the earliest time permitted under takeover rules, according to the filing.

PAG in 2024 led a group of ⁠investors ​to acquire a 60 per cent stake in developer Dalian ​Wanda Group’s mall unit for US$8.3 billion. REUTERS