Dalian Wanda makes $4.4 billion offer to take Hong Kong-listed property arm private

By Clare Jim

HONG KONG (Reuters) - China's Dalian Wanda Group is offering $4.4 billion in cash to buy out Hong Kong-listed unit Dalian Wanda Commercial Properties <3699.HK>, part of a plan to take it private before relisting it in Shanghai where it hopes to gain better valuations.

Mainland-listed firms typically command higher valuations than those in Hong Kong, helped by a large pool of retail investors. An index tracking dual-listed companies <.HSCAHPI>, shows mainland listings trade at an average 34 percent premium to the same company listed in Hong Kong.

The move comes just 15 months after Wanda Commercial's market debut. The group, led by tycoon Wang Jianlin, has set up a special purpose vehicle to buy all the Hong Kong-listed shares of the property unit.

Investors in the special purpose vehicle will receive up to 12 percent annual interest on their holdings if the property arm fails to relist in China within two years.

The HK$52.80 per share offer represents a 10 percent premium to Wanda Commercial's IPO price and values China's biggest commercial property developer at about $31 billion.

It is also a 44.5 percent premium to the unit's closing price on March 29.

But the stock, which only just resumed trade after a one-month suspension, lost 2.6 percent on Monday to stand at HK$48.70.

Dalian Wanda said in a statement that it would not increase the offer price.

A document to investors seen by Reuters showed Wanda Commercial's shares were valued at an estimated 8.6 times earnings in 2016, much lower than an average of 29.1 times for commercial property developers listed on China's domestic A-share market.

The company may seek a backdoor listing on the Shanghai exchange if it does not get regulatory approval to launch a planned initial public offering there soon, according to two people with knowledge of the matter.

Rating agency Standard & Poor's has said that Wanda Commercial's transparency could weaken following the delisting as Hong Kong requires more financial disclosure and communication to investors than the mainland.

The idea of delisting emerged at the Wanda group level over six months ago, according to a person familiar with the matter, as Wanda Commerical's share price softened and as expectations grew that the difference in valuations between China- and Hong Kong-listed companies would widen even more.

The person, who was not authorized to talk to the media, declined to be identified.

($1 = 7.7679 Hong Kong dollars)

(Reporting by Clare Jim and Denny Thomas; Editing by Edwina Gibbs)