NYSE-listed Chinese online property platform Beike to acquire renovations firm in first big deal after founder’s death

·3-min read

New York Stock Exchange-listed Beike Zhaofang, China’s largest online real estate listings and transactions platform, said it was acquiring a home renovations company for up to 8 billion yuan (US$1.2 billion), its first big investment since the death of founder Zuo Hui in May.

The company, which is also known as KE Holdings, had agreed to acquire 100 per cent of equity in Shengdu Home Renovation from its existing shareholders for a total consideration capped at 8 billion yuan consisting of cash and equity, subject to regulatory approval, the company said on Monday. Beike said it expected to close the transaction in the first half of 2022.

“We believe our proposed acquisition of Shengdu will enable us to strengthen our capabilities in providing better housing services to satisfy the evolving needs of housing customers,” said Stanley Peng Yongdong, Beike’s chairman and CEO. “We are excited to welcome Shengdu to join us and look forward to the strong synergies to be realised from the acquisition.”

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The deal comes as China’s home improvement industry reached 3.5 trillion yuan in 2020. The sector has grown at a compound annual growth rate of 11.1 per cent since 2015, according to a report by research firm EqualOcean Intelligence in March. The home improvement industry’s growth was expected to pick up as consumers were now willing to spend more on home renovations, analysts led by Shi Zhan said in the report.

“As more Chinese families pursue better living conditions, client satisfaction will become the main reason that justifies the continued existence of the entire industry,” Peng said in a separate letter on Monday.

Founded in 2002 and headquartered in Hangzhou, Shengdu is a full-service home renovations company with a network spanning seven provinces and municipalities. Its acquisition is Beike’s first big acquisition since Zuo’s death. The 50-year-old, who was China’s 15th wealthiest man with a net worth estimated at US$14.8 billion, died of an “unexpected worsening of [his] illness”, according to a filing with the New York exchange.

Beike, which is backed by investors such as Tencent Holdings and SoftBank Group, raised US$2.12 billion by selling 106 million American depository shares in August.

The company has also been in the crosshairs of China’s market regulator. Beike was warned in April by the State Administration for Market Regulation, along with dozens of internet companies, against any abuse of its market dominance and was told to conduct self inspections.

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