China developer Sunac rides to rescue cash-strained sausage maker Yurun
Analysts worried about another possible setback for developer after the failed attempt to take over Kaisa and its expansion prospect in top cities
Sunac China Holdings announced an exclusive strategic partnership agreement with troubled private food conglomerate Yurun Holding Group late on Tuesday in what investors saw shades of the developer's failed attempt to take over rival Kaisa Group Holdings.
Both Yurun and Kaisa are cash-strapped, with their controlling shareholders embroiled in the government's anti-graft crackdown. Yurun chairman Zhu Yicai has been under house arrest since March 23. He and his wife ranked 26th on the mainland's 2014 Hurun rich list, with 31.5 billion yuan (HK$38.3 billion) of wealth from a business empire spanning everything from sausage to property and finance.
What worries investors is the possibility of yet another failure by Sunac. That was how the deal with Kaisa ended up in May after Sunac moved its full team to Shenzhen, where Kaisa is based and Sunac has no presence, and kept them there for months to work out a rescue plan for Kaisa.
"Sunac comes to the rescue when these firms are in trouble, but whether it can share the benefits when they are revived is uncertain," said Edison Bian, the head of China property research at UOB Kay Hian, adding he was also concerned about Sunac's ability to further expand in its core market of first-tier cities.
Apart from the agreement with Yurun, on which Sunac provided no details, it said both sides were working on ways to resolve the food conglomerate's debts.
Nanjing-based Yurun has its food business listed in Hong Kong, which reported a first-half net loss of HK$724 million. Its commercial retail property operation is listed in Shanghai.
Sunac was also in talks with Zhu's representative, said a statement on the Hong Kong stock exchange.