China property

Vanke founder and directors may be fired in the latest takeover twist

Analysts believe this latest blow from major shareholders could mark the end game for Wang Shi as chairman

PUBLISHED : Sunday, 26 June, 2016, 11:05pm
UPDATED : Friday, 15 July, 2016, 10:32am

Wang Shi, the chairman of China’s largest homebuilder China Vanke, together with his 11 fellow directors, may all be fired in the latest twist of a takeover battle that is believed to be the final blow to force him out of the management of the company he founded.

Vanke issued an announcement on the Shenzhen Stock Exchange on Sunday saying Baoneng Group, its major shareholder with a 24.26 per cent stake, called for the company to hold a shareholders’ meeting to vote for the firing of all of its 12 directors, including Wang.

The directors will have 10 days to respond.

Meanwhile, the developer also said in an announcement on Hong Kong Exchanges and Clearing that it would soon hold a directors’ meeting to discuss the matter.

Baoneng said Wang should be fired as a director because he had spent most of the time between 2011 and 2014 studying in the United States and Britain and not carried out any duties for the company despite collecting a combined 50 million yuan (HK$58.6 million) in salary.

The 11 other directors had to be sacked as well since they allowed Wang to collect the huge sum of money while he was studying, it said.

The insurer also cited the directors’ failure to properly handle Vanke’s restructuring plan as the reason for their sackings.

To avoid a possible takeover by Baoneng, Wang and his top management have been pushing for a restructuring involving Shenzhen Metro Group.

Under the proposal, Vanke would acquire a unit of Shenzhen Metro for 45.6 billion yuan by selling shares to the subway operator.

The deal, however, was opposed by its second-largest shareholder, China Resources, which said on Thursday that it had filed complaints to securities regulators in mainland China and Hong Kong.

The opposition from China Resources and Baoneng, which together have a 39.5 per cent stake in Vanke, would see the restructuring plan blocked as approval from two-thirds of the shareholders was required.

Baoneng’s call for the firings of Wang and other directors showed the company’s intention to extend its control over the developer, said an analyst who declined to be identified.

“The latest twist shows Wang is going to lose control of the company. With Baoneng and China Resources seemingly on the same side opposing Wang’s restructuring plan, the proposal would not be approved by shareholders,” the analyst said.

“If the shareholders vote for the whole board to be fired, it would not be a problem as it is the middle management that is running Vanke’s day-to-day business. The major shareholders may appoint a new board or promote some senior management to the board.”

The analyst said another possibility was for Wang to leave on his own while some current directors got reappointed.

“This would be a better scenario as it would allow some directors to stay on,” the analyst said.

What was clear, the analyst added, was that Wang appeared to be losing the takeover battle.

Earlier this month, China Resources disputed Vanke’s claim that the restructuring proposal had been passed in a 7-3 vote of its board, saying it needed the approval from two-thirds, or eight, of its 11 members. Independent director Zhang Liping abstained from the vote.

The Shenzhen Stock Exchange said on Wednesday that it was seeking clarification from the developer on the proposal.

Critics said Wang chose to forgo most of his stake in Vanke 28 years ago, leaving a highly dispersed ownership structure that was vulnerable to a hostile takeover.

The analyst said: “The lesson of Vanke for other private entrepreneurs is that they should look at their shareholding structure very carefully. If they manage a company with only minority stakes, they may well be forced out any time by the major shareholders that have the state-owned enterprise background.”

In a speech on Thursday, Wang highlighted his vision to learn from international peers, transforming the developer into a global firm. Besides Hong Kong and Singapore, he said the company planned to prioritise investments in New York, San Francisco, Seattle and London.