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The Cheng Clan’s Mega Deal: $4.5B Buyout Plan for Industrial Arm NWS Holdings

In a significant business move, the private investment firm of the influential Cheng family of Hong Kong, Chow Tai Fook Enterprises, has proposed a buyout deal of up to HK$35.5 billion ($4.5 billion) for NWS Holdings. NWS is the infrastructure segment of the family’s renowned property titan, New World Development.

As stated in an announcement to the Hong Kong stock exchange, Chow Tai Fook Enterprises plans to acquire the shares of NWS that it doesn’t currently possess at HK$9.15 each. This includes a substantial 60.9% stake held by New World Development, an action that would substantially alleviate the property developer’s debt burden. Presently, Chow Tai Fook Enterprises directly owns approximately 2.5% of NWS.

The offer indicates a substantial premium of 14.5% over the last traded price of HK$7.99 before shares were suspended. It also means a 30.9% premium over the average closing price for the 30 trading days preceding the trading suspension. The news led to a significant spike in NWS shares, which rose by 10.3% during Tuesday’s morning session following the resumption of trading.

According to the announcement, the proposal would “immediately strengthen New World Development’s financial position” and “enhance the strategic focus of New World Development on property development, property investment and property related businesses.” From the share disposal, New World Development is set to receive about HK$21.8 billion.

Chow Tai Fook Enterprises, under specific conditions, including the acquisition of at least 90% of the NWS shares it doesn’t already own, might consider taking NWS private. The Cheng family’s patriarch, Henry Cheng, serves as a director of Chow Tai Fook Enterprises and chairs both New World and NWS.

The buyout proposition comes as New World Development is intensifying its efforts to dispose of non-core assets to reduce debt amid rising interest rates and plummeting property prices. The company aims to sell HK$10 billion worth of non-core assets within the financial year ending in June.

NWS, operating in sectors such as toll roads, construction, and insurance, serves as the industrial flagship of New World Development. Despite a 7.8% YoY increase in revenue to HK$17.6 billion in the six months leading up to December, it saw a 26.6% decrease in net profit to HK$1.2 billion over the same timeframe.

Rooted in the established Chow Tai Fook Jewellery from the 1920s, Chow Tai Fook Enterprises has investments in premium real estate, hospitality services, energy, media, and burgeoning tech companies, among others. The private investment giant is currently headed by Patrick Tsang, the grandson-in-law of Cheng Yu-tung. This development exemplifies the power moves made by influential family-run enterprises to remain competitive in the fluctuating markets.