Wanda, University of Pittsburgh Medical Centre formalise deal for US$870 million hospital in Chengdu

Zheng Yangpeng

Chinese conglomerate Dalian Wanda Group said on Wednesday it had formally signed an operational agreement to develop a high-end hospital in partnership with the University of Pittsburgh Medical Centre in Chengdu, in China’s southwestern Sichuan province.

Construction work on the 6 billion yuan (US$870.85 million) project started late last year, and it is part of a framework agreement with the US health care provider for the development of general hospitals in five top-tier Chinese cities. Another hospital worth 6 billion yuan, to be built by Wanda and co-operated by Wanda and UPMC, is being developed in Guangzhou.

The framework agreement with UPMC marks a major shift in focus for Wanda, founded in 1988 by Wang Jianlin, China’s fourth richest man, away from property development and sports franchises. The Beijing headquartered company is, in fact, looking to offload some assets in these sectors through listings overseas and raise capital and cut debt.

David Hong, head of research at property consultancy CRIC Hong Kong, said it was doubtful if the hospital business would be a major profit contributor for Wanda in the short term. “Although property developers have the financial strength and some top clients to do international hospital business, this is a sector that requires long-term operational expertise and offers stiff competition.

“For Wanda, it could learn international best practices in the management sector. This could be a major benefit. But it is difficult for it to go for scale,” he said.

Wanda dumps US$25 billion in assets, about halfway through slimming exercise

The agreement, signed with UPMC after 10 months of negotiations, will bring the US company’s brand, management and technical expertise, as well as medical training to Chengdu, Wanda said. Wang Jianlin, its chairman, has said on an earlier occasion the partnership with UPMC was deeper than merely consulting services, the mainstay of agreements Chinese firms have signed with foreign hospitals in the past.

Elsewhere, Wanda has filed for a US initial public offering of its sports unit, which could fetch it up to US$500 million, according to a filing with the US Securities and Exchange Commission this month. It plans to list American depositary shares on the Nasdaq under the ticker WSG, according to the filing.

The proceeds will be used partly to pay off a loan of US$350 million to Wanda as part of a group restructuring, at an interest rate of 11.5 per cent.

The sports unit reported a loss of 8.6 million (US$9.76 million) for the three months to March 2019, and a full-year profit of 54 million. It has total debt of 1 billion as of March this year.

Wanda and UPMC signed the framework agreement in Beijing in September last year. Photo: Handout

It was reported by Th e Wall Street Journal that Wanda was planning to list a real-estate business in Singapore, in a deal that could value that portfolio of properties at more than US$1 billion.

Yan Yuejin, a research director with Chinese real-estate services firm E-House China R&D Institute, said Wanda was seeking an overseas Reit for the IPO as it was seeking alternative financing channels.

“Singapore’s Reit market is a mature market. For Wanda, a new Reit will not only provide a new stable financing source, but also a vehicle to inject more domestic commercial assets into it in the future,” he said.

“The recent bond financing tightening in mainland China shows domestic financing channels are very unpredictable. So it is increasingly important for Wanda to secure more offshore funding channels to fund its heavy domestic investment.”

More from South China Morning Post:

This article Wanda, University of Pittsburgh Medical Centre formalise deal for US$870 million hospital in Chengdu first appeared on South China Morning Post

For the latest news from the South China Morning Post download our mobile app. Copyright 2019.