HONG KONG Sunac China Holdings Ltd (1918.HK) will buy property assets in mainland China for $2.1 billion from Legend Holdings (3396.HK), in a deal that will see the parent of computer maker Lenovo (0992.HK) exit the real estate development sector.
The deal is also set to exacerbate Sunac's debt-to-equity ratio, which stood at 221 percent at the end of last year, the highest among its listed peers, according to Thomson Reuters data.
"Sunac's gearing ratio is already a concern and this transaction will add to the load and we need to watch the impact of this transaction carefully on the company's financials," said Samson Man, an equity analyst at CMB International Securities.
Sunac will purchase 42 property projects in 16 cities including Beijing, Tianjin, Chongqing and Hangzhou, the companies said in a statement. The 13.8 billion yuan transaction is expected to be completed next year.
Legend, which is also known for its private equity arm Hony Capital and venture capital firm Legend Capital, has seen its income after tax for its property business fall by 67 percent in two years.
It said that its exit from the real estate development sector will allow it to focus on its core businesses.
Property accounted for 3.3 percent of its revenue and 14 percent of its profits in the first half of 2016.
Shares in Legend and Sunac were up 1.6 percent and 3.1 percent in early trade.
(Reporting by Saikat Chatterjee and Elzio Barreto; Editing by Edwina Gibbs)