CVC Capital-backed The Executive Centre Pauses Sale Process Amid HK Protests

Office space provider The Executive Centre (TEC) has paused its sale process over fears that its large Hong Kong exposure could weigh on its valuation as sometimes violent protests continue in the city for a third month, according to a source.

Final bids were due for the Hong Kong-headquartered company in late September but its owners – private equity firms HPEF and CVC Capital Partners – have decided to pause the process until conditions stabilise in the city, said the source, who declined to be identified because the information was not public.

CVC declined to comment. HPEF did not respond to a request for comment.

Three months of increasingly violent protests in Hong Kong began as opposition to a now-withdrawn extradition bill, but have developed into a broader backlash against the government and have left the city facing its first recession in a decade.

On Sunday, police fired tear gas and rubber bullets to disperse demonstrators in the Central business district – home of many TEC offices – as well as the upmarket Causeway Bay shopping district.

TEC, founded in 1994, operates more than 130 offices in 32 cities across 14 countries in Asia and the Middle East, it says on its website.

Hong Kong accounts for about 30% of its earnings before interest, tax, depreciation and amortisation (EBITDA), according to the source.

The company is 70% owned by HPEF – formerly HSBC’s Asian private equity arm until a buyout in 2010 – 20% by CVC and 10% by management.

No price has been made public, but the Financial Times reported in April the company was seeking a valuation of more than $750 million.

TEC is on course to produce EBITDA of $46 million for 2019, according to the source.

Its sale pause also comes as loss-making WeWork, a U.S.-headquartered office provider, has more than halved the valuation it expects from a New York initial public offering to a little over $20 billion, from the $47 billion it achieved in a private fundraising this year.

Unlike WeWork, which has focused on offering short-term space to start-ups and tech companies, TEC has focused on longer-term leases to a client roster of multinationals.

Reuters