Chinese real estate portal gets expensive paint job

HONG KONG, July 8 (Reuters Breakingviews) – China’s response to Zillow (ZG.O) gets an expensive paint job. Less than two months after the unexpected death of its founder and majority shareholder, online real estate portal Ke (BEKE.N) agreed to buy Shengdu Home Renovation for up to 8 billion yuan ($ 1.2 billion) in cash and equity.

It is a costly attempt to capitalize on diversification efforts. China’s home improvement market has grown by around 8% on average over the past five years, according to a local business group, attracting big-budget investors including Alibaba (9988.HK).

Shengdu reported sales of 3.3 billion yuan last year, a valuation of about 2.4 times. Publicly traded peers, such as Suzhou Gold Mantis (002081.SZ), collectively trade at just 0.6 times sales, according to data from Refinitiv. Following the news, Ke’s shares fell nearly 8%, more than other Chinese companies listed in the United States, wiping out some $ 3.8 billion in market value. This puts the agreement on a fragile basis. (By Yawen Chen)

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