(Yicai Global) Jan. 6 -- Gree Real Estate’s ongoing acquisition of Zhuhai Duty Free Enterprises Group might be suspended or terminated after its chairman recently came under investigation for securities violations, the Chinese property developer announced yesterday.

Lu Junsi, the chairman, is under investigation by the China Securities Regulatory Commission on suspicion of insider trading, Gree Real Estate announced on Dec. 30, sending the company’s stock plunging over 20 percent from Dec. 31 to yesterday’s close. The planned acquisition is at risk, the company then said yesterday, warning of abnormal stock volatility.

Lu is able to perform his duties as usual and the company's board of directors is also functioning well during the investigation, which will not affect the firm's daily production and business activities, per the announcement.

Zhuhai-based Gree Real Estate’s shares [SHA:600185] closed down 0.18 percent at CNY5.67 at noon today after briefly rising 1.06 percent to CNY5.75 (89 US cents) at opening, giving it a CNY12.37 billion (USD1.88 billion) market value.

Gree Real Estate, which is under Zhuhai State-owned Assets Supervision and Administration Commission, issued its plan in May to buy all of Zhuhai Duty Free by issuing shares and paying cash to Zhuhai State-owned Assets Supervision and Administration Commission and Zhuhai Urban Construction Group, and shares to raise supporting funds of up to CNY800 million (USD123.83 million) at the same time.

Above Board

The company’s stock hit the upper trading limit for eight trading days in a row from May 25 to June 3 thereafter.

The Shanghai Stock Exchange asked the firm to confirm the list of insiders submitted earlier and clarify insider trading rumors on June 3. Gree Real Estate deferred its reply to the bourse on June 17, stating that neither the company, its controlling shareholders nor its actual controllers had used insider information on the restructuring to engage in insider trading or otherwise manipulate the market.

The company’s reorganization draft plan issued on Oct. 30 proposed the purchase of 100 percent of Zhuhai Duty Free for CNY12.2 billion (USD1.87 billion). The target pledged to take in CNY551 million net profit this year, CNY641 million in 2022 and CNY747 million in 2023 from its tax-free business.

Gree Real Estate earlier said this acquisition will enable it to develop its three major business segments of tax-free business, biomedicine and real estate. It now plies the housing renovation and loans, real estate brokerage, property management, industrial investment, building materials sales and other businesses, according to Bloomberg.

Editor: Ben Armour, Xiao Yi