What’s next for Baoneng and Evergrande after the tussle for Vanke?
Vanke’s board of 11 directors are due for re-election in March 2017, which may open up another battle front for dominance
The year-long battle for China Vanke is likely to be over.
The developer’s share price fell 15.6 per cent in Hong Kong during the 12 months, declining 16.8 per cent in Shenzhen in the same period.
Chairman Wang Shi and his management team, who together control 8.41 per cent of Vanke together with the company’s union, are very likely to remain to run the developer, JPMorgan analysts Ryan Li and Karl Chan said this week.
“We believe this is what the government wants, given that Vanke is the largest taxpayer in Shenzhen, and directly impacts government revenue,” they said.
For the raiders Baoneng Group and China Evergrande Group, their leverage-funded buyout may exert pressure on their finances, analysts said.
Baoneng’s 43 billion yuan war chest was funded by insurance premium, 80 per cent of which came from Foresea’s universal life insurance product. That has since been banned by the insurance regulator to deprive Baoneng of its funding source.
It’s worse for Evergrande, whose debt-to-equity ratio is 400 per cent, making it one of the industry’s most indebted developers.