[photopress:real_estate_back_door.jpg,full,alignright]First, what is a back door listing? Looking it up one gets the quite harsh definition: ‘A technique used by a company which failed to get listed on an exchange, whereby the company acquires and merges with a company already listed on that exchange.’
Elsewhere it is listed as: ‘Acquisition and merger with a listed company by an unlisted company in order to gain a listing on a securities exchange.’ Which sounds less harsh and is probably more accurate.
The news is that mainland real estate developers are thinking about back door listings during this period when the government has a tight monetary policy.
Capital is urgently needed in view of climbing property prices and a broad range of macro control measures over property sector.
To get around the problems of an IPO — which is complicated and expensive to create and may still not work — some real estate developers are giving serious thought to back door listing.
Some of them have announced such plans since the start of 2008.
Zhongnan Real Estate Development is on the verge of realizing a back door listing through Shenzhen-listed Dalian Jinniu. According to the restructuring scheme of Dalian Jinniu, the real estate developer plans to buy 90 million shares in the listed company to become the largest shareholder. The shell company currently focuses on special steel production.
Shandong Wanjie High-Tech announced in January that it would issue not more than 882.35 million shares to five selected investors including state-owned Shandong Commercial Group in exchange for certain proportion of their stakes in five property companies.
Success Information Industry Group has signed an agreement to place 828 million shares to Rongan Group, a Ningbo-based private real estate developer. The latter would inject RMB2.4 billion worth of real estate assets into the Shenzhen-listed company as consideration. Upon the private share placement, Rongan Group will have a controlling 78.01% stake in Success Information Industry, thus achieving a back door listing.
Since the second half of 2006, dozens of real estate developers have completed back door listings.
Source: Trading Markets