China Vanke

Vanke delays board re-election to hold Baoneng at bay

The developer’s 11-member board, whose tenure expires on March 27, will continue to serve while Vanke works on a new plan, president Yu Liang said.

PUBLISHED : Monday, 27 March, 2017, 7:18pm
UPDATED : Monday, 27 March, 2017, 10:47pm

China Vanke Co., the country’s second-largest developer and target of a hostile takeover last year, said it will refrain from appointing a fresh board of directors even as their tenure ends, dealing a fresh blow to the acquirer Baoneng Group’s effort to seize control.

The tenure of Vanke’s 11-member board expired on Monday, but the Shenzhen-based developer said they can continue to perform their duties, showing no imminent plan to call for a fresh election.

“We do not have a time frame” for the board’s election, Vanke president Yu Liang said at a Hong Kong press conference after presenting the developer’s 2016 financial results. The company is working on a proposal to re-elect the board, and the election process will start once the plan is finalised, he said.

Vanke’s 2016 net profit rose 16 per cent to a better-than-expected 21 billion yuan, due to strong sales and the soaring home prices in China’s major cities.

Vanke had been fending off Baoneng since late 2015, when Yao Zhenhua’s property-and-insurance conglomerate declared a 20 per cent stake accumulated through the open market with a plan to kick out the larger developer’s management team.

The 16-month takeover battle that ensued created ripples across corporate China, not least in the way that it drew regulators’ attention to the high-stakes games waged by wayward financiers and corporate raiders. Baoneng, which got its acquisition war chest through the high-yielding financial products sold by its Foresea insurance unit, got its comeuppance when Foresea was handed a reprimand, and Yao was banned from selling insurance for a decade.

In defending its turf, Vanke’s management has been pooling the resources of other shareholders.

Shenzhen Metro, the state-owned operator of the city’s subway, became Vanke’s largest shareholder by voting rights this month, after a proxy agreement with the No. 3 shareholder China Evergrande, in a move to ward off Baoneng.

Baoneng, with a 25 per cent stake, and Shenzhen Metro, with a 14 per cent holding and 29 per cent of voting rights, have no seats on Vanke’s board. China Resources, the former controlling shareholder of Vanke, still occupies three seats on the board.

Vanke company secretary Zhu Xu said the firm still has a “smooth channel” for nominating new board members.

“Of course it won’t be pending forever. A solution will be found eventually,” Yu said.

Vanke’s shares fell 1.4 per cent to 21.2 yuan in Shenzhen, while its Hong Kong-traded shares fell 4.6 per cent to HK$21.7

The company’s 2016 sales rose 40 per cent to 364.8 billion yuan on 27.7 million square metres, losing the sales volume crown to Evergrande. New construction in 2017 may decline 6.8 per cent to 29.2 million sq m, from the 31.4 million sq m it started to build in 2016.

“Vanke really doesn’t care whether it’s the number one or not,” Yu said. “We will stick to our marathon instead of a sprint.”

New home prices in China surged 12.4 per cent in 2016, the fastest rate since 2011. Since October, many local authorities have been rolling out cooling measures, causing developer stocks to fall on expectations of weaker sales.

Zhang Xu, executive vice president of Vanke, said the policies will have little impact on the company’s business, as about 70 per cent of customers are first-time buyers who are not subject to buying restrictions.