Shenzhen Metro chairman attracted to Vanke’s ‘strong cash flow and promising growth potential’

Lin Maode makes first comments on the thinking behind company’s doomed move to take over China’s largest home builder

PUBLISHED : Friday, 09 September, 2016, 10:19pm
UPDATED : Friday, 09 September, 2016, 10:19pm

Shenzhen Metro, the operator of the city’s subway system, has claimed he was attracted to the planned takeover of the country’s biggest home builder China Vanke, because of the business’s strong cash flow and promising growth potential.

Speaking at a forum discussing the financing of city transportation development, organised by the National Development and Reform Commission, Shenzhen Metro chairman Lin Maode said the company was examining various options within the country’s rail plus property development model and continued to expand its property portfolio.

Lin said Shenzhen Metro was recently involved into a deal with a listed company, adding it was the business’s strong cash flow and growth potential which attracted him.

“I cannot disclose too much. But many people asked me why I got into it,” said Lin, who did not identify the company, but it was generally accepted in the room he meant Vanke.

China Vanke in June announced a 45.6 billion yuan agreement to trade shares for sites with Shenzhen Metro, making the operator of Shenzhen’s subway system its biggest shareholder.

The move was aimed at fending off a buyout of the company by property and insurance company Baoneng Group.

But the proposed deal foundered because it was opposed by Baoneng and another major shareholder, China Resources Holdings.

It is the first time Lin has commented, albeit guardedly, on the controversial proposed purchase of the Vanke shares.

He said Vanke’s business has grown more than 100-fold in the past 20 years, and even if it could grow just one time in the next 10 years, Shenzhen Metro could gain from the deal.

Vanke’s net profit rose to 5.35 billion yuan in the six months ended June 30, from 4.85 billion yuan.

Apart from Shenzhen Metro and China Resourcers, rivals China Evergrande Group’s recently emerged as its third largest shareholder, further complicating the situation.