Buyout firms circle $4.2 billion HK property firm

HONG KONG (Reuters) - Hong Kong property firm Chinese Estates Holdings Ltd. (0127.HK) is in talks with investors on a possible buyout of the firm, valued at more than US$4 billion, sending its shares up as much as 30 percent to a record high.

The firm issued a statement on Wednesday confirming discussions, but it would not comment further on a South China Morning Post report on Tuesday that mentioned bids from the Children's Investment Fund Management (TCI), Och-Ziff Capital Management Group, Marathon and Fortress Investment Group, and U.S. buyout firm Texas Pacific Group TPG.UL.

Its shares hit a record high of HK$16 in morning trade, and were trading up 19 percent at HK$14.66 by 0722 GMT, giving the firm a market value of HK$33 billion ($4.23 billion).

The company has been trading at a much deeper discount to net asset value (NAV) than its Hong Kong peers, and even after Wednesday's rally the stock was 25 percent below the HK$19.46 2008 NAV forecast by CLSA analysts.

Most Hong Kong property firms are trading at around 15-20 percent discounts to forecast NAV.

In Hong Kong -- where investors are often frustrated because property is tightly held by family-run firms -- Chinese Estates owns several shopping centers in prime locations that would be candidates for revamping, such as the popular but shabby Wanchai Computer Centre.

The firm considered packaging some buildings into a real estate investment trust (REIT) last year, but then put the plan on hold.

The company also develops housing in the Chinese city of Chengdu and in the casino enclave of Macau, while its Hilton Beijing hotel is its highest profile building in mainland China.

The buyout talks come less than two months after Chairman Joseph Lau, a flamboyant billionaire socialite, was forced to withdraw a plan to take the company private after his proposal failed to win the support of other major shareholders, because they felt it valued the firm too cheaply.

Chinese Estates' public confirmation shed little light on months of speculation about Lau's intentions with the firm he built from a small property developer into a high-profile Hong Kong-listed real estate player.

Local media said TCI -- which manages more than $10 billion of assets globally and owns 7.87 percent of Chinese Estates as its second largest shareholder -- opposed the initial deal.

Now Lau, who with younger brother Thomas owns 54 percent of the company, had given up trying to take the company private and intended to sell out instead, local newspapers said.

Chinese Estates is asking for HK$20 per share, or 11 percent above the HK$18 that TCI had asked for in the original privatization bid, several local newspapers quoted market sources as saying on Wednesday.

"The board confirms that it has received expressions of interest in relation to the company from a number of third parties. The board is in talks with some of these parties," the company said in a statement.

But Chinese Estates would neither identify potential buyers nor comment on pricing. It added that the talks were preliminary and may or may not lead to an offer for the company.

TCI has made its presence felt in Hong Kong in past years by snapping up stakes in Hong Kong-listed companies, including Link REIT (0823.HK) and China's Huadian Power International Co. Ltd. (600027.SS) (1071.HK).

The British hedge fund became known as the face of European hedge fund activism in 2005 when it criticized Deutsche Boerse's (DB1Gn.DE) approach to the London Stock Exchange (LSE.L), eventually forcing the German bourse's chief executive to resign and torpedoing the bid.

Lau and his brother had been dubbed corporate raiders by the local press after a series of deals in the 1980s. In recent years the tycoon focused on heading up his flagship listed firm.

But the property mogul still makes regular headlines, as when he ordered a private Boeing (BA.N) 787 airplane this year valued at $153 million at listed prices. Last year, Lau paid US$17.4 million at an auction for an Andy Warhol portrait of Mao Zedong.

(Additional reporting by Alison Leung)

($1=HK$7.816)