(Yicai Global) Oct. 21 -- Shares in China Evergrande Group plunged today after the debt-ridden real estate giant said that it has pulled out of negotiations to sell a majority stake in its lucrative property management arm for HKD20 billion (USD2.5 billion).

Evergrande’s stock price [HKG:3333] plummeted 12.54 percent to HKD2.58 (USD0.35) per share as of 1:30 p.m. China time. Evergrande Property Services Group [HKG:6666] sank 6.64 percent to HKD4.78. Both stocks had suspended trading since Oct. 4 while the deal was thrashed out.

Hopson Development Holdings agreed on Oct. 4 to purchase a 50.1 percent stake in Evergrande Property at a price of HKD3.70 (USD0.48) per share, a 25 percent discount on today’s trading price, Guangzhou-based Hopson said yesterday.

Evergrande, however, felt that Hopson did not meet the prerequisites for a tender offer of Evergrande Property and backed out, Guangzhou-based Evergrande said yesterday without going into future details.

Evergrande did not follow through with the necessary sales procedures before Oct. 12 as had been agreed and the deal fell through, Hopson said.

Evergrande has been desperately looking to offload assets to repay mounting debts. It is in talks to sell its Hong Kong headquarters building and is also preparing to sell a 19.93 percent stake in Shengjing Bank for nearly CNY10 billion (USD1.6 billion).

Evergrande Property is its most profitable business. The property management unit logged a 68.6 percent jump in profit in the first half from the same period last year to CNY1.9 billion (USD297 million) and revenue leapt 68.3 percent to CNY7.9 billion.

Mired in debt brought on by overaggressive expansion, the developer is embroiled in a number of lawsuits due to unpaid fees. In the latest row, Evergrande failed to pay interest on a US dollar denominated bond on Sept. 23 and has been given a grace period of 30 days. It is unclear whether it will still be able to pay in time.

Editor: Kim Taylor