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Country Garden to acquire Manguo Kangjie
Posted on Thursday, 15 October 2020 11:19
Subsidiaries of Country Garden Services Holdings are acquiring almost 70.0 per cent of Shandong Manguo Kangjie Environmental Sanitation for CNY 2.40 billion (USD 873.43 million) to expand into the urban service category. Country Garden Property Services HK will pick up an initial 49.5 per cent stake for CNY 1.49 billion from BLP Capital. Second subsidiary, Country Garden Life, is buying 15.4 per cent from Huzhou Ruilong Enterprise Management Partnership and 5.1 per cent from Huzhou Yuxin Enterprise Management Partnership for an aggregate CNY 964.90 million. The overall price tag was determined following arm’s length negotiations based on the performance guarantee for Manguo Kangjie for 2020. It anticipates net profit after NRI of not less than CNY 220.00 million and operating revenue of a minimum CNY 2.40 billion, multiplied by the price-to-earnings ratio multiple of 15.9x and the price-to-sales multiple of 1.4x, respectively. This would be after taking into account the different returns on investment required by each of the vendors. Manguo Kangjie was established in 2015 and specialises in providing integrated management and operation services for urban and rural environmental sanitation, with business covering 20 provinces, cities and autonomous regions in China. The group had audited consolidated net asset value of CNY 904.78 million, as at 31st December 2019. It had net profit of CNY 190.98 million for the 12 months ended 31st December 2019 (FY 2018: CNY 101.24 million). Country Garden said the “environmental sanitation industry is expected to record a stable growth” due to “the acceleration of the urbanisation process and the growing market-driven development” of the sector in China. The acquisition is expected to be beneficial for its strategy of expanding into the urban service field and will help build a diversified brand. Country Garden noted that if its environmental sanitation segment has not been listed on a domestic or foreign stock exchange by 31st December 2027, it has the option to acquire the remaining equity interest in within one year. The consideration for the balance of the equity interest shall not exceed CNY 4.50 billion. © Zephus Ltd