China Vanke Finds Investor in Fight With ‘Hostile Takeover’

Updated on
  • Vanke signs letter of intent to buy assets from an investor
  • Shares will remain suspended amid talks with other parties

China Vanke Co. said it has found a potential investor and is in talks with others as the managers of China’s biggest listed homebuilder wage a struggle for control against its largest shareholder.

The company signed a letter of intent to buy unspecified assets from a potential investor by issuing new shares and using cash, according to a statement to Hong Kong’s stock exchange Tuesday. The price will be decided after due diligence and the transaction may not be completed, the Shenzhen-based company said. Vanke didn’t say how many shares it will issue or to whom, and didn’t say what assets it plans to buy.

President Yu Liang said earlier this month that Vanke faces a “hostile takeover” from Baoneng Group, which became its biggest shareholder after increasing holdings. Vanke’s announcement on Dec. 18 that trading was being suspended pending the release of information about a share sale and asset restructuring had prompted speculation it was seeking to dilute Baoneng’s ownership.

“The main purpose should still be to dilute Baoneng,” Alan Jin, a Hong Kong-based real estate analyst at Mizuho Securities Asia Ltd., said by phone. Buying assets may make the share sale “more acceptable to smaller investors” as the assets may be able to generate revenue and reduce the dilution effect, he added. “Vanke isn’t short of money.”

Shareholder Support

The management wants “all shareholders’ support” in its asset restructuring to keep the company’s culture, brand name and credibility, which are Vanke’s “most valuable wealth,” according to a Dec. 26 statement. If the ownership structure can become more stable as a result, it will benefit Vanke’s credit ratings and long-term growth, the homebuilder said.

Shenzhen Jushenghua Co. and fellow Baoneng unit Foresea Life Insurance Co. boosted their combined Vanke stake to 24.3 percent as of Dec. 24, according to a Dec. 27 filing. Anbang Insurance Group Co. raised its holding to 7.01 percent, a move later welcomed by Vanke.

The letter of intent will terminate if the two sides fail to reach a written agreement on the transaction before June 30, according to Tuesday’s statement.

The acquisition will be made with either Vanke’s shares traded in Hong Kong or Shenzhen and in cash, Vanke said in the statement.

The shares will continue to be suspended as the restructuring is “relatively complicated” and the company is also in talks with other parties, Vanke said without giving details.

— With assistance by Dingmin Zhang

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