China

UPDATE: LeEco Reportedly in Talks to Sell Stake in Coolpad; Sunac China is Among Potential Buyers

Summary:

  • Troubled LeEco has reportedly been negotiating with multiple Chinese real estate developers with a view to selling its holding in Coolpad Group (2369.HK), according to Sina Tech.
  • Coolpad has confirmed that it has been “preparing for restructuring”, but denied the rumor that the company plans to shift its domestic focus to real estate businesses.

Why It Matters:

  • Companies in talks with LeEco reportedly include Evergrande Group (3333.HK), Country Garden (2007.HK), and Sunac China Holdings (1918.HK). Of these companies, Sunac China has just acquired a 91% stake in Wanda Group’s 13 travel entertainment real estate projects for RMB 43.844 billion, and it is considered to be the most likely buyer of the stake in Coolpad.
  • LeEco, which recently experienced a cash crisis, is Coolpad’s largest shareholder, holding 28.87% of Coolpad.
  • Coolpad’s performance has also been under pressure, but the company still has valuable land assets. Coolpad posted revenue of HK$ 7.99 billion for 2016, down 45.5% compared with the previous year. The company also posted a net loss of HK$ 4.21 billion for 2016, compared with a net profit of HK$ 2.33 billion for 2015.