China Vanke to issue shares to Shenzhen Metro Group in possible 45.6 billion yuan deal
Asset restructuring at China’s largest home builder comes amid battle for control between top management and majority shareholder Baoneng Group
China Vanke, China’s largest home builder, on Friday revealed details of its asset restructuring by bringing in state-owned subway operator Shenzhen Metro Group as an investor in a deal worth an estimated 45.6 billion yuan.
In a filing with the Hong Kong stock exchange, Vanke said the board has approved the resolution to acquire assets held by Shenzhen Metro’s wholly owned SZMC Qianhai International Development via the issue of shares.
The firm agreed to issue to Shenzhen Metro 2.87 billion shares at 15.88 yuan each, which is a 35 per cent discount to the average trading prices of China Vanke shares in the past 60 days.
Vanke said Shenzhen Metro would be subject to a 36-month lock-up period from the day of listing of the consideration shares.
After the completion of the transaction, Shenzhen Metro will hold more than 20 per cent of the company’s shares.
“The transaction can help to improve the company’s financial position and strengthen its sustainable profitability. It will not lead to a situation where the company’s major asset consists only cash or the company has no specific operating business after the completion of the transaction. After the completion of the transaction, the company’s core business will become more prominent, its capability in risk resistant will be strengthened, thereby enabling the company to enhance its independence, reduce connected transactions and avoid horizontal competition,” Vanke said in the filing.
The asset restructuring comes amid a continuing battle for control between its top management and conglomerate Baoneng Group, which holds a key stake in Vanke.
Shares of China Vanke have been suspended from trading since December last year.
On June 13, China Vanke signed four memorandums of understanding, including one with Shenzhen Metro, on “intensified strategic cooperation” on the development of the fourth phase of the city’s subway system.
The two firms also entered into three separate cooperation agreements with Dongguan Industrial Investment Holding Group, Chongqing City Transportation Development and Investment Group and China Metro Group.
“The MOUs seek to explore the application of the new public-private partnership model in urban railway development and to promote the ‘railway+property development’ model to more cities,” Vanke said on June 13.