China property

Vanke gains after Baoneng raises shareholding to almost 25pc

Property developer’s shares had plunged by the 10 per cent limit on Monday and Tuesday

PUBLISHED : Wednesday, 06 July, 2016, 5:11pm
UPDATED : Friday, 15 July, 2016, 10:32am

China Vanke, embroiled in a long-running takeover saga, saw its mainland traded A-shares rebound on Wednesday after its largest shareholder Baoneng Group raised its stake in the company to approximately 25 per cent.

Vanke confirmed Baoneng had raised its stake, in a filing to the Shenzhen Stock Exchange on Wednesday night.

The country’s largest property developer saw its Shenzhen shares gain 0.05 per cent to 19.8 yuan by the close on Wednesday, reflecting their first upbeat session since trading resumed on Monday, following a more than six month trading suspension.

The shares plunged the 10 per cent limit on Monday and Tuesday.

Vanke said late Tuesday in an early exchange filing that Baoneng had bought another 75.29 million shares, or a 0.68 per cent stake, increasing its holding to 24.972 per cent through its subsidiary JuShenghua.

Tuesday’s closing price of 19.79 yuan suggests that Baoneng spent approximately 1.5 billion yuan to acquire the shares.

Baoneng, a privately owned property and insurance conglomerate, has tapped margin financing to enlarge its stake in Vanke, becoming its largest shareholder late last year, replacing state-owned China Resources.

Analysts have expressed concerns over Baoneng’s capital if Vanke’s A-shares declined more than 30 per cent.

Some believe that Baoneng’s additional share purchases were made to avoid a forced liquidation because of its equity pledge.

But others suggest Baoneng’s move could be motivated by different factors.

“I don’t think we should worry about Baoneng’s financial capability,” said an investment bank property analyst.

“In general, the largest shareholder faces a one year lock-up period in A-shares, that means Baoneng has prepared enough budget for holding them for at least one year,” he said.

Vanke has been trying to fend off a potential hostile takeover by Baoneng. The developer unveiled a plan in June to bring in Shenzhen Metro to dilute Baoneng’s stake, but Baoneng opposed the deal.

Vanke’s Shenzhen shares were suspended from trading on December 18 at the request of the company.