Cash-Strapped Leshi Internet and Its Subsidiary to Receive USD2.1 Billion Financing From Sunac
Yicai Global
/SOURCE : Yicai
Cash-Strapped Leshi Internet and Its Subsidiary to Receive USD2.1 Billion Financing From Sunac

(Yicai Global) Jan. 16 -- Leshi Internet Information & Technology Corp. [SHE:300104], the listed subsidiary of Chinese Internet giant Leshi Holdings Co., Leshi internet's own subsidiary and Jia Yueting, founder of Leshi Holdings, have secured financing totaling CNY16.8 billion (USD2.4 billion). New financing will help relieve a cash squeeze that has plunged Leshi Internet into a financial crisis in recent months.

Hong Kong-listed property developer Sunac China Holdings Ltd. [HKG:1918] and its subsidiary will jointly invest CNY15 billion in Leshi Internet and its subsidiary, according to an announcement made by Leshi Internet on Jan. 13. Sunac China will become Leshi Internet's second-largest shareholder upon completion of the deal. In addition, another two investors will make a combined investment of CNY1.83 billion in Leshi Zhixin Electronic Technology (Tianjin) Co., Leshi Internet's television subsidiary.

"With these funds, we will resolve our financial difficulties once and for all," Jia Yueting, founder of Leshi Holdings, said at a press conference yesterday.

Leshi Holdings will also cooperate with Sunac China in its businesses. Though Leshi Holdings will not enter the real estate sector, it hopes to use its internet ideas to better serve the real estate sector, Jia said.

Investing in Leshi is mainly based on two business arguments, Sun Hongbin, chairman of Sunac China, said at the press conference. First, he agrees with Leshi's commercial philishopy. Leshi just runs out of cash. The latest investment can give Leshi the money it needs. Second, Sunac needs to invest in businesses it hopes to develop to expand its market.

"Leshi Holdings' logic of entering the auto business is correct. I also wants to invest in cars, but I know little about cars. The latest investment will provide all the money Leshi needs except for its car business," Sun said at the press conference.

"I divide Leshi's businesses into two segments. Auto and non-auto. I don't understand auto, which needs more money than non-auto. This time, we just solve the financial difficulties for non-auto segment. We will provide the money it needs once and for all. We will fill the funding gap," Sun emphasized.

The real estate sector is set to continue to grow rapidly over the next five to 10 years, Sun said. Investing in Leshi means making preparations for five to 10 years later. In the future, Sunac will invest in areas including financial platforms, energy, mega entertainment, mega health and possibly auto, while Leshi is focusing on mega entertainment, he added.

According to statement released by Leshi Internet on Jan. 13, the latest capital operation mainly includes the CNY6,041 million transfer of some of the company's shares held by its actual controller Jia Yueting to Sunac China, which will become Leshi Internet's second-largest shareholder, and the introduction of Tianjin Jiarui Huixin Corporate Management Co., owned by Sunac China, to Leshi Zhixin, controlled by Leshi Internet, as a strategic investor. Tianjin Jiarui Huixin will invest CNY7.95 billion in Leshi Zhixin by acquiring its existing shares and participating in its capital raising and share-offering program. Leshi Zhixin will also secure financing totaling CNY1.83 billion from Ningbo Hangzhou Bay New Area Leran Investment Management Partnership and Huaxia Life Insurance Co. Tianjin Jiarui Huixin will also pay CNY1.05 billion to Leshi Holdings, Leshi Internet's parent company, for a stake in Leshi Pictures.

Trading in Leshi Internet's A-shares, which has been suspended for a month due to fundraising plans, will resume today.

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