Billionaire Chengs' NWS Mulls Sale of Hong Kong’s CityBus

(Bloomberg) -- NWS Holdings Ltd, the infrastructure arm of New World Development Co. controlled by Hong Kong’s billionaire Cheng family, is considering a sale of its public transport business in Hong Kong for about $300 million, people with knowledge of the matter said.

The divestment includes Citybus Ltd. and New World First Bus Services Ltd., which are among major franchised bus service operators in Hong Kong, said the people, who asked not to be identified as the discussions are private. The company has held talks with potential suitors including Chinese conglomerate China Merchants Group, the people said.

Citybus and First Bus have a combined fleet of more than 1,600 buses running on about 200 routes, according to NWS’s website. The bus operation posted a 63% drop in profit to HK$127 million ($16 million) in 2018 from a year earlier due to declines in fare revenue and higher operating expenses, according to NWS’s annual report. NWS also operates 20 vessels, offering ferry services on five routes in Hong Kong.

The recent protests in Hong Kong against the government’s extradition bill may drive away shoppers and tourists as clashes between police and protesters escalated, impacting the revenues of bus operators. Anti-China sentiment in the city, fueled by the protests, could bring uncertainty to the transaction, the people with knowledge of the matter said.

Deliberations are at an early stage, and no final decision has been made, the people said. Shares of NWS rose as much as 0.8% in early Thursday trading. The stock dropped 4.5% this year, while the city’s benchmark Hang Seng Index rose 10.5%.

A representative for NWS said in an emailed response to Bloomberg that the company doesn’t comment on any speculative market rumor, adding that it receives different business proposals from time to time and doesn’t have any agreement with any party at the moment. A representative for China Merchants Group declined to comment.

Hong Kong’s biggest franchised bus operator is Kowloon Motor Bus Co., which had more than 4,000 buses on over 400 routes as of the end of 2018. Hong Kong’s daily passengers on public transport are expected to rise to 13.2 million in 2021, from 12.6 million in 2016, on the continued expansion of railways, according to a government study two years ago.

NWS has been expanding its business beyond infrastructure and logistics. In December, the company joined New World Development in a pack to buy FTLife Insurance Co. for HK$21.5 billion ($2.8 billion). NWS, again with its parent and related subsidiaries, won a HK$30 billion contract to build and operate a giant sports park in Hong Kong’s former Kai Tak airport area.

--With assistance from David Watkins and Dominic Lau.

To contact the reporters on this story: Vinicy Chan in Hong Kong at vchan91@bloomberg.net;Manuel Baigorri in Hong Kong at mbaigorri@bloomberg.net

To contact the editors responsible for this story: Fion Li at fli59@bloomberg.net, Joanna Ossinger

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