china property

China property

Battle over developer China Vanke takes dramatic turn as top insurer throws support behind beleaguered company management

Anbang Insurance supports China Vanke chair Wang Shi in fight to repel takeover by Baoneng Group

PUBLISHED : Thursday, 24 December, 2015, 10:15am
UPDATED : Friday, 15 July, 2016, 10:32am

In a dramatic twist in the fight to take over China Vanke, Anbang Insurance Group, a significant shareholder of mainland China’s largest home builder, said it will support chairman Wang Shi and his management team to run the company and fend off a hostile takeover by the Baoneng group of companies.

Anbang said in an announcement, issued by Vanke on Thursday, that it approved of Vanke’s existing corporate culture and operating style. The insurer, which was cited by mainland media as an ally of Baoneng in the takeover bid of Vanke, said it would support the existing management and its business strategy in property and property finance.

Vanke also said in a separate announcement that it welcomed Anbang, a well-known Chinese insurer which led the purchase of the iconic Waldorf Astoria hotel in New York, as a major shareholder.

Anbang Insurance Group increased its holdings of China Vanke’s A shares to more than 7 per cent before trading in the stock was suspended last Friday.

The support of Anbang brings the shareholding of Wang Shi’s alliance which includes China Resources Holdings, Wang Shi and his management team to about 30 per cent. It exceeds rival Baoneng’s 23.52 per cent holding.

In an earlier meeting with investment bank Credit Suisse on December 23, Wang said it had rejected overtures from Baoneng and its group due to different corporate cultures.

“Vanke management and I do not mind making compromise. What I value most is the corporate culture,” said Wang. He said the management has not enough money to block the bid. “We need all shareholders’ support. If you like out culture, you approve of our operating style, please support us,” Wang told investors.

Wang added that with Baoneng’s shares in Vanke, they would enter the board of directors sooner or later. ‘But they are not big enough to easily change the management team and board of directors,” he said.

The battle heated up on December 4 when Vanke said Baoneng, through Jushenghua and Foresea, held a combined 20 per cent stake, overtaking China Resources to become Vanke’s largest shareholder. As of December 11, that stake had risen to 22.45 per cent.

On Friday, Vanke asked that its Hong Kong and Shenzhen shares be suspended pending a planned share issue for acquisitions. Two days later, Vanke said in a filing that it would disclose the restructuring plan before January 18.

In response to Baoneng’s moves, Wang said last Thursday that he did not welcome Baoneng, questioning the company’s credibility and financing capacity.

Baoneng, controlled by Yao Zhenhua, is a privately owned property developer and financial-services group based in Shenzhen. By December 15, it had raised its stake in Vanke to 23.52 per cent.

David Hong, the head of research at consultancy China Real Estate Information Corp’s Hong Kong office, said he believed Vanke management may invite a third-party investor as a way to dilute Baoneng’s control over the company to fend off its attempted takeover.

“It is impossible for them to issue shares to China Resources. China Resources does not have rights to vote so that the resolution will not be passed,” said Hong.

I“Issuing new shares to dilute Baoneng’s shareholding is not an easy option,” said Hong Kong-based fund manager Lee Kwok-suen. It requires approvals from shareholders, he added.

Analysts said it is also not easy to find a new investor who can pay HK$30 billion to buy the new Vanke shares in a such a period of time, unless Wang can convince Beijing and get its support.

“The last option is to suspend the shares for a long period of time. As companies of Baoneng bought shares in Vanke through margin financing, the group will see increasing funding costs and banks will force them to repay their loans,” said Hong.