Shanghai’s Greenland Group is betting that Chinese consumers will like Italian cars even more than Aussie apartments
Greenland Group, which already sells more homes than any other real estate developer in China, has decided to try its hand at marketing BMWs, Ferraris and Range Rovers too.
The state-owned developer is spending HK$1.5 billion ($193 million) to acquire China Rundong Auto Group Ltd, which distributes high end cars through a network of more than 50 dealerships. The deal was announced by Rundong to the Hong Kong stock exchange over the weekend
The Shanghai-based firm is one of a number of Chinese real estate companies that have announced plans to diversify into other areas in recent years as a slowing domestic property market squeezes developer profits. The high profile deal appears to be part of an aggressive diversification program being adopted by Greenland as it prepares for its upcoming Shanghai stock listing.
Greenland to Sell Maseratis Alongside Its Apartments
Greenland is buying its 46 percent stake in Rundong from US private equity giant KKR, which is making a nice profit from China’s love for exotic rides. After the deal the company will be renamed China Greenland Rundong Auto Group Limited.
In addition to BMW, Ferrari and Range Rover, Rundong sells Audis, Toyotas, Cadillacs and Maseratis through its dealerships in Shanghai as well as in Suzhou, Nanjing and other cities in eastern China’s Jiangsu province.
Rundong raised $124 million through its Hong Kong IPO last year, and KKR had put $100 million into the company in 2010 to acquire an undisclosed stake in the Jiangsu-based car seller.
State-Owned Developer Continues to Expand Aggressively
The acquisition by Greenland is the latest in a series of moves that have seen the Shanghai-based company become one of China’s biggest overseas investors, as well as moving it into new areas such as Internet finance.
Just last month the homebuilder branched out into Internet finance by teaming up with Alibaba’s Ant Financial to sell RMB 200 million ($32 million) in online debt products as a way to fund its development projects. Greenland predicts that it will soon offer this online finance platform to other developers, and this week launched a $220 million share issue in Hong Kong to help fund that expansion.
During April Greenland was granted approval to list on the Shanghai stock exchange by injecting assets into an existing listed company. The backdoor listing would create China’s largest listed real estate developer by sending RMB 65.5 billion of Greenland’s assets into the Shanghai-listed company in return for 11.3 billion new shares of the listed company, valued at RMB 5.58 per share. No date has been publicly announced for completion of the listing process.
During 2014 Greenland moved past China Vanke to become the country’s biggest developer by sales, helped to a large extent by its growing portfolio of overseas housing projects. Just this month the developer broke ground in new projects in London and Toronto with an estimated value of more than $1 billion.
Over the last two years, Greenland has also picked up development sites in Sydney, Melbourne, Bangkok, New York and Malaysia.
While Greenland has no background in the automotive sector, Rundong said in a statement that it sees synergies for the new alliance by expanding its automobile sales and service to Greenland’s home-buying customers.
The two companies also said that they plan to work together to develop new businesses on the Internet and in automotive finance.
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