“China’s Warren Buffett” has a point to make — that he is as good at selling assets as buying them.
In an open letter to his employees on December 8, Guo Guangchang, who controls China’s largest private conglomerate Fosun International, wrote: “Warren Buffett has once said the timing of investment is critical and companies should know the timing to sell better than the timing to buy.
The latest proof of this new emphasis on selling comes as Guo’s Shanghai-based investment conglomerate disposes of 50 percent stake in the Bund Finance Centre (BFC) for RMB 5.33 billion – a project that just a few years ago Fosun was willing to head to court to keep to itself.
“As an international group that invests globally, it’s pivotal to maintain financial stability and asset liquidity. Fosun’s investment capability has well been recognised by the industry but ‘selling’ is a core competency that we should enhance going forward,” Guo said in his internal message.
Ironshore Disposal Helps Balance Sheet
The tycoon’s remarks also came shortly after Fosun sold Ironshore Inc, a US property and casualty insurer, to Liberty Mutual Holding for some $3 billion early this month. Fosun bought Ironshore for about $2.3 billion two years ago, and had been looking to take the company public.
The insurer sale caused a shock wave as Fosun over the past year had scooped up many overseas targets that include German private bank H&A, Indian pharmaceutical group Gland Pharma and Wolverhampton Wanderers, the UK football club. Other notable group assets consist of Club Med and a 25 percent stake in Cirque du Soleil.
“In the past, everyone is interested in what Fosun has acquired, but recent projects show that Fosun isn’t only good at buying, it’s also good at selling. We are increasing our financial strength by embarking on various agile ways such as an ‘exit strategy’,” wrote the 49-year-old Shanghai billionaire.
Active Shanghai Market Supports Bund Finance Centre Sale
For its combined retail and office complex in Shanghai, Fosun is choosing an opportune time to sell. The buyer is an outfit called Jiaxing Shengshi Shenzhou Wenli Investment Partnership (Limited Partnership), and with the government currently clamping down on capital outflows, onshore real estate assets are looking more attractive than ever for many mainland investors.
Fosun is expected to reap a pre-tax income of RMB 1.08 billion from the deal, according to the statement. “The group intends to use proceeds from the transaction for repayment of existing loans and for general corporate operating purposes,” the conglomerate said in a filing to the Hong Kong Stock Exchange on December 12. “It will increase our liquidity and financial agility.”
The sale along Shanghai’s waterfront comes not long after other landmark transactions in the city. Hong Kong billionaire Li Ka-shing’s Cheung Kong Property Holdings was able to take in the equivalent of $3 billion in October selling the Century Link commercial complex in Pudong to a fund set up for mainland insurer China Life by Singapore’s ARA Asset Management.
Selling Off a Prized Asset
For Fosun the sale of the 420,000 square metre complex, which includes office buildings, a shopping centre and a hotel, comes just over a year after the company won back control of the asset through a messy court battle.
In that case, Fosun had taken action against Beijing’s SOHO China, who had snatched away a 50 percent stake in the project from Fosun’s partners Shanghai Zendai and Greentown China despite Fosun enjoying rights of first refusal on sales of shares in the project company.
The stake disposal of the Bund Financial Centre came as the private conglomerate tries to lower its leverage piled up from its global buying spree. The project has also suffered from lackluster leasing, analysts said.
Its leasing efforts have lagged far behind schedule and Chinese media reported in January that following the shocked departure of Bund Finance Centre CEO Wu Yang which was “possibly caused by the poor leasing”, Fosun was said at the time to be mulling a sale of as much as a 49 percent stake in the complex for over RMB 10 billion.
While Guo touted this pair of December asset sales as proof of a new strategy, China’s best-known Buffett fan may not have abandoned acquisitions entirely. In his statement to his team, Guo said the group will eye opportunities in emerging countries such as Russia, India, Brazil and Southeast Asia, with particular attention to industries such as big data, robotics and artificial intelligence.