(May 13): Blackstone Inc has walked away from a proposed US$4 billion ($5.1 billion) tie-up with New World Development Co after the embattled property developer refused to hand over the reins, people familiar with the matter said.
The New York-based real estate investment firm has informed the company of its decision, ending a protracted year-long negotiation that stalled in recent months, according to the people, who asked not to be identified because the information is private. Goldman Sachs Group Inc advised Blackstone on the deal, the people added.
Talks drifted since March as New World held parallel discussions with other suitors, including a consortium led by RRJ Capital and Ares Management Corp, the people said. Unlike Blackstone, those groups are not pushing for a controlling stake, opting instead for minority positions that would allow the Cheng family to remain as the largest shareholder, the people said.
Under the original plan, Blackstone would become the largest shareholder, proposing to inject about US$2.5 billion into a special‑purpose vehicle, while the Cheng family would contribute US$1 billion to US$1.5 billion, one of the people said in March.
Representatives of Blackstone, Goldman, New World and Ares declined to comment. A spokesperson for RRJ didn’t respond to a query.
RRJ is still assembling a consortium and has proposed acquiring less than 30% in New World via a share sale. Ares has offered a capital injection to shore up the company’s balance sheet, but has insisted that the Cheng family pledge shares as collateral. It has also invited some Asian sovereign funds to join the consortium, the people said.
See also: London Metal Exchange sees Hong Kong sheds swelling to 'hundreds of thousands of tons'
It stands in contrast with Blackstone’s plan. The US alternative asset manager had sought to restructure the property firm to reduce leverage, reset bank loan terms and review assets, the people said.
CapitaLand Investment Ltd also held talks previously with the developer. It’s unclear whether those discussions are still ongoing. Any investment the firm evaluates must align with its platform strategy and must meet its financial return thresholds and adhere to its governance framework, a representative for the Singapore firm said.
The competing groups are pressing New World to resolve about HKD70 billion (US$9 billion or $11.4 billion) of liabilities tied to a long-term rental agreement for a shopping mall at the Hong Kong airport as a pre-requisite for any deal.
See also: Hong Kong bourse posts record profit on listings, trading
The developer is currently in negotiations with the Hong Kong Airport Authority to terminate its previous agreement and transfer the HKD30 billion mall to the authority at no cost, people familiar have said.
The clock is ticking for the cash-strapped developer to devise a plan by the end of June, when its annual audit is released, the people said. Banks need to reset loan terms based on the latest balance sheet figures.
There is still a possibility that the billionaire Cheng family will forgo a deal altogether by injecting capital via a rights issue after its finances were bolstered by the recent US$4.3 billion sale of Australia power generator Alinta Energy Pty Ltd, the people said.
Uploaded by Tham Yek Lee
