Evergrande Taps New Tycoons for EV Unit Worth More Than Ford
(Bloomberg) -- Chinese billionaire Hui Ka Yan has moved beyond his poker pals to finance expansion at his debt-laden empire.
The chairman of China Evergrande Group tapped new tycoons with links to his other real estate ventures to raise billions for an electric-vehicle startup that’s now worth more than Ford Motor Co. -- all without any mass production of cars.
Three of the six strategic investors of China Evergrande New Energy Vehicle Group Ltd.’s $3.4 billion share offering in January were cornerstone investors of a property-services unit that went public two months earlier. Another backer helped finance an attempted listing by the parent company in mainland China. Hui also turned to the wife of long-time supporter Joseph Lau, part of the “Big Two Club” of tycoons who play the poker game of the same name.
The new backers underscore Hui’s ability to expand his network of rich acquaintances to raise money for his empire as the government clamps down on property firms by restricting their borrowing to avoid a crash.
“When liquidity is tight, it pays to have Hui Ka Yan’s network of wealthy friends,” said Brock Silvers, Hong Kong-based chief investment officer of Kaiyuan Capital. “Hui’s fund-raising methods may raise questions regarding the true depth of market support for Evergrande’s ventures.”
While lesser known than the familiar web of Hui’s supporters, the new financiers have helped him join the global craze for electric vehicles. Evergrande’s EV unit is now a $61 billion behemoth, worth twice as much as Nissan Motor Co. even though it hasn’t formally kicked off mass production.
Each investor has agreed to a 12-month lock-up period for the subscribed stock, which shows their confidence in the electric-vehicle business, Evergrande said in a reply to Bloomberg. Proceeds will be used to build car production bases and for research and development, the company added.
“This once again demonstrates Evergrande’s unbreakable business partnership with its close industry friends,” said Maggie Hu, assistant professor of finance and real estate at The Chinese University of Hong Kong. “Since the alliance is often strategic and long term, it substantially reduces cash flow stress for the company.”
Here’s a rundown of the latest supporters for Hui, China’s 14th-richest person with a net worth of about $23.5 billion, according to the Bloomberg Billionaires Index.
1. Chen Hua
The chairman of Kingkey Group personally put 5 billion yuan ($770 million) into the EV startup through a unit, according to a filing. Kingkey was also a cornerstone investor in Evergrande’s property-services IPO in December, buying HK$236 million ($30 million), according to a term sheet seen by Bloomberg.
Chen is a veteran of the real estate sector, hauling cement on construction sites in his early 20s. He formed his own company in 1994, completing landmark buildings like the 98-story KK100 tower in the high-tech hub of Shenzhen.
Kingkey made its name in 2002 after inviting former U.S. President Bill Clinton to give a speech at one of its residential projects, and later had former U.K. Prime Ministers John Major and Gordon Brown at company events.
2. Wong Kwong Miu
Wong, who was born in 1969 in the southern Guangdong province and now holds a Hong Kong passport, founded Shenzhen-based developer Centralcon Group in 1993 and controls mainland-listed Shenzhen Centralcon Investment Holding Co. Centralcon remains small, with contracted sales hovering around 15 billion yuan, or about 2% of Evergrande’s. Most of its residential portfolio is in the Greater Bay Area that includes Hong Kong.
Like Hui, Wong was a member of the Political Consultative Committee, which helps advise the government on policy.
Wong personally invested 5 billion yuan into the EV maker through a unit. The developer’s controlling shareholder was a cornerstone backer of Evergrande’s property-services unit in December with a HK$200 million investment, filings and term sheets seen by Bloomberg show.
3. Liu Ming Hui
The 57-year-old founding chairman of China Gas Holdings Ltd. has gone through a rare transformation -- from an against-the-grain entrepreneur to established executive to criminal suspect and back again.
A native of the northern province of Hebei, Liu was a government official responsible for luring foreign investment to the area before joining the state-owned energy supplier. After a year-long detention on what turned out to be false allegations of embezzlement, Liu returned to China Gas. His jailhouse inspiration included turning the company’s army of meter readers into door-to-door sales people, selling everything from insurance to food delivery.
Liu personally put 3 billion yuan into the EV startup. A subsidiary of China Gas, Hai Xia Finance was also a cornerstone investor of Evergrande’s service unit in December, filings show.
China Gas said in an e-mailed reply to Bloomberg that it signed a pact with Evergrande in 2020 for “all-round” cooperation, including installing gas pipelines, supplying natural gas and providing heating services for Evergrande projects.
“China Gas believes working with Evergrande, a leading developer in China, will help its business,” the firm’s spokesperson wrote.
4. Wang Zhongming
Wang leads Shenzhen Greenwoods Investment Group, with businesses spanning construction and agriculture to hotel and finance, according to a filing. Greenwoods’ 80 billion yuan in total assets include the mineral water, grain and oil businesses that were sold by Evergrande, its website shows. Greenwoods invested 5 billion yuan in the EV maker.
Another firm founded by Wang, Shenzhen Jiahui Investment Group, controlled two strategic investors of Evergrande’s onshore division known as Hengda Real Estate, the unit that had planned to go public in China and later triggered a liquidity scare when it failed to do so. Shenzhen Huajian Holdings put 5 billion yuan into Hengda in December 2016 as a first-round investor, while Shenzhen Jiancheng Investment added 3.5 billion yuan in May 2017 as a second-round participant.
5. Chan Hoi-wan
Chan, 41, a former journalist and now chief executive officer of Chinese Estates Holdings Ltd., has long had ties to Hui through her billionaire husband, Joseph Lau. Chan has said that she has regular video calls with Hui and other business partners.
The Hong Kong developer has paid a price for its investments in Evergrande. Chinese Estates said last month it expects to post an unrealized loss of HK$5.8 billion on its Evergrande stake. Holdings in the Shenzhen-based firm, whose shares have tumbled 37% in the last two years, account for 41% of Chinese Estates’ total assets.
That didn’t deter Chan from being the largest backer in the pre-listing funding round of Evergrande’s property-management arm last year, subscribing to 5% of the shares. Chan also invested HK$3 billion into the EV unit.
The latest bets have fared better for Chan than Evergrande itself. Shares in the property-services unit have surged 70% since the IPO in December, while the EV arm has almost doubled since shifting its focus to autos last August.
Kingkey, Centralcon, Chinese Estates and Greenwoods didn’t reply to requests for comment.
For Hui, meanwhile, the backing from Chan and the other tycoons may pave the way for his first array of cars to be built.
“The recent equity fund raising and self financing by the EV company should be sufficient for its development in 2021 and 2022,” said Raymond Cheng, a property analyst at CGS-CIMB Securities.
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