China Vanke

Shenzhen Metro set to become Vanke’s largest shareholder

PUBLISHED : Wednesday, 07 June, 2017, 10:08am
UPDATED : Wednesday, 07 June, 2017, 10:39pm

China Vanke, the target of one of the country’s most contentious corporate raids in recent years, said its second-largest shareholder, Shenzhen Metro Group, is considering raising its stake in the property developer.

“Details regarding such an acquisition have not been confirmed and are subject to requisite approvals,” Vanke said in a stock exchange filing on Wednesday.

Trading of its yuan-denominated A shares was halted on the Shenzhen exchange, after they fell 1 per cent to 20.87 yuan. The company’s Hong Kong-listed stock jumped as much as 5.2 per cent to a one-month high of HK$21.3.

Analysts say the surge in the share price reflects investors’ high expectations that the state-owned subway operator, an ally of Vanke’s management, will replace raider Baoneng Group as the largest shareholder after the transaction. That would be broadly perceived as a happy ending to the high profile takeover battle.

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Danielle Wang, a property analyst at DBS Vickers, said she believes China Evergrande Group, Vanke’s third largest shareholder with a 14.07 per cent stake, will transfer most or all of its shares to Shenzhen Metro.

“The lockup period of Evergrande is six months, it’s expired already so it will transfer its shares to Shenzhen Metro,” Wang said.

There are early signs that Evergrande, the country’s largest property developer, owned by billionaire Hui Ka-yan, wants to exit the shareholders’ fight for control.

In March, Evergrande entrusted its voting rights in Vanke to Shenzhen Metro for a period of one year.

Mizuho Securities’ analyst Alan Jin echoes the view, saying the Shenzhen government supports Shenzhen Metro taking control of the city’s top developer.

Vanke, China’s second-largest homebuilder by sales, had been embroiled in a takeover battle since late 2015, when the Chinese property-insurance conglomerate Baoneng Group accumulated a 25.4 per cent stake to mount a hostile takeover and oust Vanke’s existing management.

However Baoneng and another raider, Evergrande, stepped back after China’s stock regulators and Shenzhen’s government intervened, criticising the leveraged buy-out, and helped Vanke to introduce Shenzhen Metro as a “white knight” earlier this year.

China Resources Holdings, then Vanke’s second largest shareholder, sold its entire 15.31 per cent stake to Shenzhen Metro in January.

Yet Vanke’s new board remains up in the air despite the three-year term of the current 11 directors having already expired.

The property giant plans to hold its annual shareholder meeting in June in Shenzhen, while the board re-election schedule is still unknown.