China Vanke

China Vanke says it’s not clear who would emerge as largest shareholder under proposed restructuring

PUBLISHED : Monday, 14 March, 2016, 9:46pm
UPDATED : Friday, 15 July, 2016, 10:32am

China Vanke, the mainland’s largest property company, said it wasn’t clear who would emerge as its largest shareholder under its proposal, unveiled publicly on Sunday, to acquire up to 60 billion yuan (HK$71.7 billion) of property assets from state-backed Shenzhen Metro.

“The final price, stake (of Shenzhen Metro) would be subjected to the formal plan, which is still under negotiation,” Vanke’s President Yu Liang told media in Hong Kong on Monday.

Yu did not specify a timeline for when further details of the deal would be announced.

China Vanke said the restructuring would benefit all shareholders, but did not specify the size of the share sale or provide a breakdown of the largest shareholders if the deal were to go through.

When asked if the dilution would hurt small shareholder’s interest, Yu said his job was to make sure the company delivers good results.

Vanke has issued a total of 11.05 billion shares by the end of 2015. Based on its latest share price of 24.43 yuan in Shenzhen before its suspension on December 18, Shenzhen Metro would take up to roughly 18 per cent of Vanke’s stake after private placement.

The weekend announcement comes as China Vanke battles to prevent a hostile takeover by Chinese insurer Baoneng Group, which currently ranks as the single largest shareholder in the property group.

Baoneng, with a 24.26 per cent stake, could see its holding diluted to 19 per cent after the restructuring.

Meanwhile, Vanke’s former largest shareholder, state-owned China Resources, newly introduced partner Anbang Insurance and Vanke’s management, hold a combined 26.44 per cent of the company. If the preliminary agreement with Shenzhen Metro’s were to proceed, Vanke could gain support from shareholders representing more than 40 per cent.

In a filing to Shenzhen’s stock exchange on Sunday, Vanke said it would fund the acquisition by selling new shares to the Shenzhen-based subway operator in exchange for real estate assets atop its subway stations in the fast-growing city. Vanke added that any shortfalls in the price could be made up in cash.

The potential share issuance and asset injection will need approval by Vanke and Shenzhen Metro’s boards and shareholders, as well as state-owned assets and securities regulators.

The mainland’s largest home builder saw its Hong Kong-listed shares surge 10 per cent on Monday to close at HK$20.15, after announcing the potential tie up with Shenzhen Metro. It also released its 2015 annual results showing a 15.1 per cent rise in full year net profit to 18.12 billion yuan.

Vanke said they saw large room to develop “subway plus property” projects in the future, especially in Shenzhen, where the metro only covers 28 per cent of the city’s public transportation, the lowest level among first-tier cities.

“I’m very positive, such projects are much more resistant to price fluctuations,” Yu said.

Trading of Vanke’s shares in Shenzhen has been suspended since December 18. It is scheduled to hold an extraordinary shareholder meeting on March 17.