Vanke responds to Shenzhen bourse’s questions on 45.6b yuan Shenzhen Metro deal

Mainland property giant China Vanke published a 30-page statement on Friday night, in which it responded to a list of questions flagged up by Shenzhen Stock Exchange, over apparent corporate governance issues the bourse has with the company’s proposed deal to acquire a unit of Shenzhen Metro Qianhai International.

Vanke, the mainland’s biggest property company by sales which is headed by chairman Wang Shi,

has said it hopes to acquire the unit for 45.6 billion yuan via a new share issue, making the state-owned subway operator its largest shareholder.

Armed with the legal support of leading mainland magic circle firm Jun He Law Office and a validation to the deal’s financials by auditor KPMG, Vanke addressed the bourse’s issues, particularly over whether independent director Zhang Liping had discharged his duty properly when he chose to abstain from a vote on Vanke’s decision to buy out Shenzhen Metro Qianhai International.

Zhang is the China chairman of private equity fund Blackstone.

When he stepped out from the vote, the document said the fund was in active discussions with Vanke over transactions, raising questions from the bourse over his impartiality.

The bourse had questioned whether the Vanke board had actually reached the required quorum to make its vote valid.

It has raised the point, too, over how Vanke intended to deal with the likelihood of the Hong Kong-listed H-shares available to the public, after the deal, dropping below 10 per cent.

Hong Kong stock exchange rules say a company must maintain a minimum of 25 per cent of its shares available, under which a stock can be suspended from trading.

In its document, Vanke confirmed the bourse’s suspicion, and that the deal would likely result in just 9.45 per cent of the company’s H shares being available.

But it said it was yet to arrive at a solution to resolve the issue.

“The company will set up measures to resolve the issue as soon as possible, including but not limited to, conducting a rights issue for H-shares or making other capital markets activities happen,” Vanke said in its response.

There was an additional footnote made on the 30-page response, that the bourse’s queries were made while three of Vanke’s directors “still held personal opinions” over the issues.

The company said its board will offer further communication with the three individuals.

Vanke added it still remains determined to see through the deal, which has also drawn opposition from its two major shareholders.

It maintained that its acquisition by Shenzhen Metro was essential for its transformation from being just a mainland property developer, into what it called a “Rail + Property” operator.

It said the Shenzhen Metro deal will give it access to wholesale development rights, including those to manage properties associated with metro projects owned by Shenzhen Metro.

It will also give it a diversified product portfolio with a wealth of possibilities, it said, ranging from residential apartments and grade-A offices, to surface and underground commercial properties, luxury hotels and serviced apartments.