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Christine Chan

PIONEERING B share company Vanke has come under fire from disgruntled major shareholders who are proposing a massive overhaul which could see the overthrow of the board, including chairman Wang Shi.

   The rationale behind the move, say shareholders, is that Vanke's operations are not clear-cut, its equity investment is not justified and the management has not been carrying out original strategies.

   Originally listed as Shenzhen, Vanke, one of the first companies to list on the exchange, had A shares listed in January 1991 and B shares in May last year.

   Yesterday, Vanke shares plunged 6.7 per cent in light trading, while the Shenzhen B index fell a slight 0.84 per cent.

   However, the drop was not seen as a response to unrest at the company, because the announcement was made after trading hours.

   Vanke, which generates most of its profits from property development and equity investment, lost HK$0.60 yesterday to close at $8.40.

   If the restructuring is approved by shareholders at their meeting next month, Vanke will cut out its diversified businesses of trade, industries and equity investment, and will focus mostly on property development.

   If Vanke's existing management is removed, the board may be replaced by eight to 10 representatives appointed from among the shareholders.

   In addition, a special committee under the board would then be set up for the approval of major investment projects.

   The proposal was announced by Shenzhen-based J & A Securities, which said it had received authorisation from four founder shareholders.

   The four are Shenzhen New Generation Industry, Hainan Securities, Smarthill Investment and Charm Yield Investment. The last two are Hong Kong firms.

   J & A Securities, which indirectly holds about three per cent of the company, said the four shareholders had combined holdings of 10.73 per cent in Vanke, which had an issued share capital of 183.55 million yuan (about HK$162.53 million).

   Stunned by the announcement, chairman Wang Shi and head of securities Yu Liang, who attended yesterday's meeting in Shenzhen, offered a different version of the shareholders' move.

   Mr Wang and Mr Yu, who were told of the move only yesterday morning, said a different proposal had been passed at the directors' meeting on Tuesday.

   Mr Yu, holding a declaration from New Generation, which holds a 6.5 per cent stake in Vanke, said he and Mr Wang had the company's support.

   A press conference has been called by the management in Shenzhen today about the reorganisation.

   J & A Securities managing director Zhang Quoqing said the proposal could be considered normal for any company in that it reflected the concerns of shareholders for their investments.

   He said Wang Shi had ''done a great job for the company'', although there was room for improvement.

   A spokesman for the brokerage said Vanke's diversified operations had proved unattractive to investors, because ''a short-term speculation in a sector can window-dress a company's profits so that losses in other sectors will be covered''.

   He was referring to the company's involvement in the equity investment sector, which had generated most of its quick profits.

   He said that although Vanke had one of the highest per-share earnings in Shenzhen last year, its price earnings was the lowest of the A share counters, and its B share prices had seldom traded above the issue price.

   Instead of building affordable houses as originally planned, the spokesman said the management had switched to developing luxury residential premises, citing Shanghai Vanke City Garden as one example.

   The purchase of a five per cent stake in Shanghai Shenhua last year, costing 39.4 million yuan, was also questionable.

       The spokesman said the management's aim of seeking a foothold in Shanghai could have been achieved through other channels.

   The brokerage said the Shenzhen Securities and Exchange Commission had been informed of the proposal as required by the law.

   However, it is unclear whether there are regulations governing disagreements between shareholders and management.

   It is also uncertain whether a financial adviser will act as an adviser to the minority shareholders.

   The validity of the proposal could also be in question because of the indirect interest J & A Securities has in Vanke, representing a possible conflict of interests in its role as a financial adviser.



Investors call for Vanke shake-up