Evergrande Sells Online Unit Stake for $2 Billion Before IPO

China Evergrande Group raised HK$16.4 billion ($2.1 billion) selling a stake in its online home and car sales platform ahead of a planned U.S. listing, in the latest move by the giant developer to tap outside investors to finance growth.

Two Evergrande units issued a combined 1.3 billion new shares of a subsidiary that holds a majority stake in the online business known as FCB Group, the developer said Monday in a filing. The investors will hold a 10% stake in the unit after the sale is completed.

FCB Group is weighing an initial public offering in the U.S. as soon as the fourth quarter, people familiar said last week. The portal, currently valued at about 130 billion yuan ($20 billion), had separately reached out to prospective investors for a pre-IPO funding round, the people said. Evergrande is targeting a minimum pre-listing valuation of 150 billion yuan, according to the filing.

Faced with China’s new lending restrictions on real estate firms, the developer is turning to outside investors and public markets to raise funds through its related units ranging from property services to electric vehicles. The company sold $3.4 in shares of its car unit in January, turning to several investors who also backed the public offering of the services business two months earlier.

Evergrande was among the first Chinese developers to start selling homes online, and ran promotional campaigns as the coronavirus outbreak halted on-site sales. FCB, or Fangchebao, comprises a suite of platforms for buying and selling real estate and other assets including new and used cars in China.

CEO Backer

Strategic investors in the funding round include units owned by the family of New World Development Co. billionaire Henry Cheng, Evergrande’s Chief Executive Officer Xia Haijun and Citic Capital Holdings Ltd., the filing shows. Backers also include Cheng Chung Kiu, chairman of C C Land Holdings Ltd., Evergrande said in a separate news statement.

New World’s Cheng and C C Land’s Cheng have had extensive financial ties with Evergrande’s billionaire founder Hui Ka Yan, through what’s known locally as the Big Two Club because of their fondness for a Chinese poker game of the same name, according to company filings and media reports.

Investors also include a firm controlled by Wang Zhongming, the filing shows. Wang led Shenzhen Greenwoods Investment Group, which invested 5 billion yuan in Evergrande’s EV maker in January. Another firm founded by Wang controlled two strategic investors of Evergrande’s onshore unit that had planned to go public in China and later triggered a liquidity scare when it failed to do so, public records show.

If the online sales unit doesn’t complete an IPO on Nasdaq or any other stock exchange 12 months after the completion of the stake sale, the unit is required to repurchase the shares with a 15% premium.

China Evergrande, controlled by billionaire Hui, jumped as much as 8.5% to HK$16.08 in Hong Kong trading, the biggest jump in two months. The developer’s 2025 dollar bonds rose 2.6 cents on the dollar, on track to be the biggest gain since late December, according to prices compiled by Bloomberg.

©2021 Bloomberg L.P.

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