Evergrande Signals Bid to Control Rival Developer Langfang

Updated on
  • Firm doesn’t exclude possibility to obtain control: filing
  • Evergrande bought 5% Vanke stake this month in surprise entry

Billionaire Hui Ka Yan’s China Evergrande Group, which last week made a surprise entry into an ownership tussle for the nation’s largest residential developer, signaled its ambition to obtain control in another Chinese firm.

Evergrande, which boosted its stake in Shanghai-traded Langfang Development Co. to 15 percent in the past four months, plans to further increase its holdings and doesn’t exclude the possibility of obtaining actual control of the firm, Langfang said in a filing Wednesday, citing Evergrande response to a Shanghai exchange inquiry asking for more disclosure on the purchases. Evergrande also raised the possibility of participating in the management of the developer, even though it currently doesn’t have a “clear plan” to restructure the company.

“Deep-pocketed Evergrande appears to have a strong will to fight for control,” China Investment Securities Co.’s Beijing-based analyst Li Shaoming said, adding that Langfang’s long-standing largest holder may not want to give up their controlling position easily.

Moves by Evergrande to amass stakes in Langfang, based in Hebei, a city adjacent to Beijing, comes after it bought a 5 percent stake in China Vanke Co. earlier this month. Led by Chairman Hui, Evergrande is known for an aggressive business style and may eventually turn the Vanke stake into a strategic investment, according to analysts from JPMorgan Chase & Co.

Evergrande, based in Guangzhou in southern China, has been on an acquisition spree in the past year, including paying 3.6 billion ($542 million) yuan for a major stake in Shenzhen-listed China Calxon Group Co. Last year, it acquired Mass Mutual Tower in Hong Kong and agreed to buy assets from New World China Land Ltd.

Adding Stakes

Evergrande became Langfang’s second-largest holder on April 12, after amassing a 5 percent stake. Beijing-based Langfang suspended trading a day later as the company proposed a restructuring plan that was later aborted. After Langfang resumed trading on July 21, Evergrande increased its stake twice, in increments of 5 percent each, in late July and early August.

Langfang State-Owned Land Development & Construction Co.,the biggest shareholder, retaliated to boost its stake to 15.3 percent.

The shares of Langfang surged 63 percent from July 21 when they resumed trading to Wednesday when they were once again suspended pending a response from Evergrande.

Evergrande plans to spend at least 50 million yuan over the next year to purchase more Langfang shares, the Evergrande said in an Aug. 8 statement. A day later, Langfang State-Owned Land said it also plans to boost its stake, by as much as 500 million yuan, which China Investment’s Li estimates will bring its holding to almost 20 percent.

— With assistance by Emma Dong

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