What to say to a friend whose problems give you a chance? Evergrande shares are suspended while a rival, Hopson, studies the possibility of taking a majority stake of 4.3 billion euros in the property management unit of the struggling developer, according to Chinese media reports. For his part, the tycoon Joseph Lau has launched a purchase offer of 220 million euros for the 25% that his family does not already own in another real estate company, Chinese Estates. His actions have been affected by his close ties to Evergrande boss Hui Ka Yan, Lau’s poker partner. Sellers, in both cases, are faced with strong hands in which they will have no choice but to fold.

Lau and his wife Chan Hoi-Wan are offering HK $ 4 per share for the minority stake in Chinese Estates, which is a valuation of 846 million euros for the property developer, focused on Hong Kong and London. The offer price is final. It’s a 38% premium over the last price before its suspension last week. The shares have been hovering around the 12-year low and are down two-fifths this year.

Evergrande’s troubles are the main cause of the Chinese Estates stock plummet. His troubled rival’s equity and bond holdings accounted for a third of his total assets last year. That’s what loyalty between friends looks like: Evergrande bought its 25-story Hong Kong headquarters from Lau in 2016 at a price that was generally considered higher than the market price.

However, Lau and Chan would be getting a bargain, as their offer represents a huge discount of 69% to the value of the company’s net assets as of June 30. Assuming you sold your remaining Evergrande shares at the current price, that would still leave the offering valued at a 47% discount, based on our calculations. When another tycoon, Gordon Wu, excluded € 3.5 billion Hopewell Holdings in 2019, the 43% discount to the net asset value of that operation was deemed outrageously large.

Evergrande itself has little more leeway. Its shares and those of its real estate management unit were suspended on Monday, as were the shares of Hopson Development, another mainland Chinese developer, considered the potential bidder for 51% of the distressed division, for $ 4.3 billion.

At first glance, this is a 44% premium for your shares, if the news is correct. Evergrande, cash-strapped, should be content with it. Lau’s minority shareholders can’t do much about price, but they could bluff him and block the deal. Taking advantage of the scraps is smart enough, but the loot could be spread more widely.

The authors are columnists for Reuters Breakingviews. Opinions are yours. The translation, of Carlos Gomez Down, it is the responsibility of Five days


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