China Vanke

China Vanke and partners to acquire commercial properties from Blackstone Group

PUBLISHED : Tuesday, 12 July, 2016, 9:55am
UPDATED : Friday, 15 July, 2016, 10:32am

China Vanke, the largest homebuilder in mainland China, is planning to spend 3.9 billion yuan (HK$4.5 billion) to acquire commercial property companies from Blackstone Group amid an ongoing battle for control with its top shareholders.

In an announcement filed to the Hong Kong exchange, Vanke said the company, together with partners it did not identify, propose to acquire 96.55 per cent of the shareholding of a company affiliated with Blackstone Group, which holds a number of commercial property companies.

“The consideration for the transaction will not include the issuance of any securities of the company and there have been no discussions regarding the issuance or acquisition of any shares of the company in connection with the acquisition,” Vanke said in a statement on Tuesday.

The announcement came after Hong Kong media, citing an anonymous letter of accusation, reported that Vanke was in talks with Blackstone to buy the private equity giant’s two commercial property platforms. The letter charged that Vanke hadn’t properly disclosed the deal.

The report triggered market curiosity over whether Blackstone would be another “white knight” as troubled Vanke has been under going restructuring in hopes of fending off a takeover bid by its largest shareholder Baoneng Group. Vanke proposed introducing Shenzhen Metro as its biggest shareholder via a planned 45.6 billion yuan share placement in June.

But the Blackstone deal will not involve the issuing of any shares, with Vanke declining to disclose the proposed payment method.

The acquisition will cost 12.87 billion yuan, of which Vanke will contribute 3.89 billion yuan and the remainder will be financed by its partners, Vanke said.

Negotiations over the acquisition began in January and the offer was approved by the Vanke board on June 21. However, the company said it has not yet entered into a legal binding agreement.

Most of Blackstone’s commercial properties are in China’s second- and third- tier cities
Property analyst

The homebuilder said the partners do not involve individuals connected to the company. Vanke also said the size of the proposed deal did not constitute a “discloseable transaction” under Hong Kong and Shenzhen exchange rules.

Vanke has an existing relationship with Blackstone. The private equity firm became a shareholder of Vanke Logistics in 2015.

Zhang Liping, greater China chairman of Blackstone, serves as an independent director of Vanke. He abstained from voting on the Shenzhen Metro deal because Blackstone and Vanke were in talks about the sale of a commercial property project.

China Resources, Vanke’s second largest shareholder, opposed the legality of the voteon the grounds that only parties related to Shenzhen Metro should be excluded from voting.

Some analysts said the reasons behind Vanke’s latest actions amid the increasingly fierce battle for control are hard to explain.

“Most of Blackstone’s commercial properties are in China’s second- and third- tier cities. You can’t say it is a very high quality portfolio, and the sector is under pressure because of oversupply,” said a property analyst who requested anonymity.

The analyst added it was hard to see any Vanke deal proposal being approved by shareholders now as control of company remains uncertain.

The purpose of the Blackstone acquisition was “to rapidly enhance the company’s operation and management capability for commercial properties,” Vanke said in the announcement.