Chinese developer ponders $10bn deal to buy Australia’s biggest homebuilder

Chinese property developer Country Garden is in talks to buy Meriton, Australia’s largest residential builder. 

If successful, the move would be a further indication of Chinese construction firms’ desire to expand outside China as problems of overcapacity and slowing sales take the shine off the market.

The news broke at the end of last month when Meriton’s founder, Harry Triguboff (pictured) told Bloomberg: "It’s of great interest to me to sell." He declined to name the buyer, but it has since been reported that the Guangdong firm Country Garden is the one negotiating the deal.

One factor that may make a sale easier than usual is that Triguboff – who is 81 and is nick-named "High-rise" Harry because Meriton specialises in blocks of flats – owns all the shares of the company. 

And although Country Garden is listed on the Hong Kong stock exchange, it is controlled by Yang Huiyan, who is reputed to be the richest woman in Asia, with a personal fortune of $16bn.

Johnson Zhang, the chief executive of Country Garden’s Australian arm who is leading the negotiations for the buyer, told website Business Review Weekly that he and Mr Triguboff "get along very well". 

"He’s my senior and he is teaching me a lot about property development in Australia," he said.

Mr Zhang declined to comment on the chances of a sale. "It is still too early to make any definitive comments on the Meriton sale. There is a long way to go to confirm the sale and the price," he said.

One reason for this is that in the absence of a stock exchange listing, there is some uncertainty as to the value of Meriton. 

Triguboff told Bloomberg: "I showed them my valuation, they’re looking at their valuation; that’s what we’re doing now." 

He later put a value of A$10bn ($8.7bn) on the company, a price tag that would make him the second richest person in Australia after the mining heiress Gina Rinehart.

Various valuations have been estimated in the Australian press. A lower figure was A$6bn. The Australian Financial Review’s Street Talk column suggested an internal Meriton valuation put the company at about A$7.3bn, although corporate adviser Grant Samuel suggested it was worth A$12bn based on a multiple of 10 times earnings.

The strength of Meriton’s earnings reflects a surge in residential property prices in Australia. The firm, which mainly builds apartment blocks on Australia’s east coast, has benefited from a 12% rise in the value of apartments in Sydney. Meriton stands to gain from this rise as it has bought A$1bn of land since January 2013.

The developer is looking to accelerate its rate of housebuilding in response to the price rise. As it stands, Meriton owns enough land to build about 15,000 flats.

It started work on 7,929 dwellings in the 12 months to the end of June, compared with 2,573 over the previous 12 months, according to company figures. The company’s debt pile stands at A$275m.

Cash rich Asian developers are also looking to take advantage of this market. As well as Country Garden, interest has been shown by Chinese developers Greenland, China Vanke and Xinyuan Real Estate, as well as Singapore’s Frasers Centrepoint.

Country Garden sold $11.9bn of property last year, mostly apartments, and is projected to turn over up to $18.5bn next year.

Australia is also of interest to Chinese homebuyers: Meriton sells about 15% of its flats to Chinese investors, according to company figures.

Triguboff, the son of Russian parents who fled the 1917 revolution, was born and spent his early childhood in China. 

He has spent 50 years building up the Meriton business. Country Garden was the creation of another self-made billionaire, Yang Guoqiang, who began his career as a labourer on construction sites. He gave his share of the company to his daughter in 2007.

Story for GCR? Get in touch via email: [email protected]

Latest articles in Companies