China Vanke

Evergrande inches closer to Vanke prize with 10pc stake in China’s largest developer

Vanke’s H-shares soar to a record in Hong Kong

PUBLISHED : Wednesday, 23 November, 2016, 9:34am
UPDATED : Wednesday, 23 November, 2016, 10:58pm

China Evergrande Group is inching closer to winning a seat among the directors of China Vanke Co, with a disclosure that it has accumulated 10 per cent of the larger developer’s outstanding shares.

Associated companies and units belonging to Evergrande have bought 552 million Vanke shares on the Shenzhen Stock Exchange in August and September, doubling its stake to 10 per cent, according to a Vanke statement.

With the stake, Guangzhou-based Evergrande is eligible to call for a shareholders’ meeting, according to Vanke’s articles of association.

The move pushed Vanke’s shares to a record HK$23.40 in Hong Kong. Its shares in Shenzhen were down 0.3 per cent to 27.22 yuan, after hitting an all time high last week.

China Vanke says no talks with Evergrande despite stake increase

“The share prices are already too high and not related to fundamentals, as investors expect Evergrande to continue its stake purchases, ” said Toni Ho, a property analyst at RHB-OSK Securities.

Evergrande remains the third largest shareholder of Vanke, after China Resources and Baoneng Group.

Evergrande, which is chaired by Hui Ka-yan, named recently by Forbes as China’s ninth richest man worth US$9.6 billion, surprisingly joined the country’s largest property developer’s take over battle in August when it acquired a 5 per cent in Vanke.

Vanke has been embroiled in a ownership tussle since late last year after little-known Baoneng Group built up a holding of about 24 per cent and became its largest shareholder. It now controls 25.4 per cent of Vanke.

In June, Baoneng requested an extraordinary shareholder meeting seeking to oust the Vanke board, including chairman Wang Shi, but the request was refused by the board.

But now the focus has shifted to between Evergrande and Vanke.

Ho said Evergrande will face challenges if it wants to buy out Vanke in light of its 300 billion yuan market value and diversified shareholding structure.

Evergrande itself has one of the highest debt levels in the industry, which could be a drag, he added.

“But even it is just an equity investment, Evergrande can already earn huge financial benefits if it exits,” Ho said.

In the statement, Vanke highlighted that the change of shareholding did not trigger a general offer, or lead to a change in the company’s largest shareholder.

Vanke’s chairman Wang Shi said at the weekend the company has become a stock manipulated by investors, but that he and the management would continue to safeguard the company.

“Different parties are interested in Vanke. Some are interested in the ‘shell’ (the company’s listed status),” he said.