Incident: The company announced that it intends to acquire most of the shares in Leju
The board of directors announced the acquisition of most of Leju's shares. According to the announcement, the board of directors of the company announced that on July 31, 2020, the company entered into a share transfer agreement and agreed to acquire 56.19% (or 51.40%, on a fully diluted basis) of Leju's issued share capital. The share transfer agreement I was concluded between Sina and the Company and others. The company conditionally agreed to purchase 244,38564 common shares of Leju and 36,687 American Depositary Shares (each representing one common share) from Sina. The total price is about US$93.6 million (approximately HK$725.4 million). The company will distribute and pay for the issuance of 78,676,790 shares to Sina at an issue price of HK$9.22 per share. The share transfer agreement II was concluded between Chow and the Company and others. The company conditionally agreed to purchase 49686192 common shares of Leju and 2239804 American Depositary Shares (each representing one common share) from Chow's Fang. The total cost was approximately US$199 million (approximately HK$1,539 million). The company would distribute and pay for the issuance of 1669,18440 shares to Chow at an issue price of HK$9.22 per share.
Alibaba was introduced as a shareholder and a business cooperation agreement was concluded. The company entered into a share subscription agreement with an Alibaba subsidiary. The Alibaba subsidiary conditionally agreed to subscribe and the company conditionally agreed to allocate and issue 118 million subscribed shares at a subscription price of HK$7 million per subscribed share, with a total subscription amount of HK$828.1 million. Furthermore, the company has signed a note purchase agreement with Alibaba note holders. Alibaba note holders conditionally agree to subscribe for the company's HK$1,031.9 billion convertible notes. The convertible shares expire on the third anniversary of the issue date. 2% interest is accrued each year, and can be converted into shares at the initial exchange price of HK$10.37. The company and Alibaba (China) Network Technology Co., Ltd. signed a business cooperation agreement and unified cooperation to establish an online real estate marketing and trading platform to jointly explore new business opportunities. Alibaba Group will provide technological support for the company and Leju's respective businesses.
Strong alliances complement each other. The Leju online platform provides real estate e-commerce, online advertising and online listing services. Its platform covers more than 370 cities and consists of local websites with various mobile applications. The online advertising and online listing services provided by Leju make up for the shortcomings of Yiju's first-hand housing agency and economic network services. According to the announcement, the company expects that the acquisition of most of Leju's shares will complement its proposal to cooperate with Alibaba Group (including) to build an online real estate trading platform.
Investment advice: “Better than the market”. We believe that the company's current acquisition of most of Leju's shares and the introduction of Alibaba as a shareholder and technical partner will help expand the company's first-hand housing agency market share, make up for shortcomings in brokerage business, strengthen back-office technical support, and help the company's market competitiveness and operational efficiency in the long term. We expect the company's EPS in 2020 to be $0.67 per share, giving the company 15-17 times PE valuation in 2020, a corresponding reasonable market value of HK$154-175 billion, and a corresponding reasonable value range of HK$11.15-12.64 per share before the merger. (Unless otherwise specified in this article, all prices are in RMB, 1 HKD is approximately RMB 0.90) Risk Warning: Affected by the pandemic, agent sales are under pressure.