Vanke Director Says China Resources Funded Baoneng Purchase

Updated on
  • Independent director cites share pledge in July last year
  • Comments highlight potential for mandatory takoever offer

A China Vanke Co. director said the developer’s two biggest shareholders cooperated during a share purchase last year, fueling speculation that a mandatory takeover offer is possible if regulators decide the pair are acting in concert.

Baoneng Group pledged shares of unit Shenzhen Jushenghua Co. to get funding from China Resources (Holdings) Co. to buy Vanke stock last year, said Hua Sheng, an independent non-executive director. Hua made his comments on Weibo and verified them in a text message. He said he was confirming media reports, without giving his own source for the information.

The link suggests Baoneng and China Resources are acting together, although it’s not clear what view regulators will take, Hua, an economics professor at Southeast University in the city of Nanjing, told Bloomberg News by message on Wednesday.

If deemed to be in concert, the firms’ combined shareholding of more than 30 percent would trigger a general offer for the nation’s largest publicly traded developer, according to Frank Hong, a Beijing-based partner at Dorsey & Whitney LLP who specializes in areas including mergers and acquisitions. Such a finding isn’t certain and would depend on the evidence, including whether China Resources knew what the money would be used for, he said.

Public Spat

Vanke has been in a public spat with the two shareholders over a restructuring proposal involving a public transit operator. Baoneng and China Resources together own more than 40 percent of the firm’s stock and have opposed a share sale that would dilute their stakes and make Shenzhen Metro Group the largest owner.

Baoneng pledged 2.02 billion Jushenghua shares to get funding from a China Resources unit in July 2015, the month that Jushenghua and another Baoneng unit, Foresea Life Insurance, started large purchases of Vanke stock, according to a report on the website of the People’s Daily on Tuesday, which cited an unidentified market participant.

A non-bank entity or individual financing an investor’s purchase of shares is acting in concert, according to Chinese rules governing acquisitions of listed companies.

“It has completely nothing to do with the Vanke ownership tussle,” China Resources said in an e-mailed statement, referring to the share pledges and subsequent purchases by Baoneng. “Someone used this to hype, and it was very irresponsible to confuse the public.”

Representatives at Vanke declined to comment, while those at Jushenghua didn’t respond to requests for comment. 

Baoneng units boosted their holdings in Vanke to 25 percent last week, while China Resources held 15.3 percent as of June 27, according to filings. Listed in Hong Kong and Shenzhen, Vanke’s stock was suspended for half a year in the latter city before resuming trading last week.

Selling about $6.9 billion of shares to Shenzhen Metro would be part of restructuring to end what Vanke has labeled a hostile takeover bid.

— With assistance by Dingmin Zhang, and Emma Dong

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