Minsheng’s Lu Says Stake Purchase Not a Challenge to Anbang

  • Lu dismisses speculation of a Vanke-style battle at Minsheng
  • Lu has ‘lot of respect’ for bank’s No. 1 shareholder Anbang

China Minsheng Banking Corp. Vice Chairman Lu Zhiqiang said he’s acting alone as he boosts his stake in the lender and dismissed speculation that his moves may signal a looming tussle for ownership with the bank’s largest shareholder, Anbang Insurance Group Co.

Lu’s purchases of about $1.1 billion of stock since July 11 through his China Oceanwide Holdings reflected his confidence in Minsheng, the “reasonable” price of the shares, and Oceanwide’s long-term strategy of becoming a financial conglomerate, he said in a phone interview Tuesday.

Lu Zhiqiang

Photographer: Wei Yao/Imaginechina/AP Photo

“I will not act in concert with anyone,” said Lu, who was one of the founding shareholders of the Beijing-based lender 20 years ago. He said he had “a lot of respect” for Anbang, and had agreed with the insurer on “many aspects” of the bank’s development.

Lu rejected recent reports that compared the stake building at Minsheng Bank with the situation at China Vanke Co. The tussle over the property firm has included an obscure conglomerate, Baoneng Group, emerging as the biggest shareholder last year, management complaining of a “hostile takeover,” and, in the latest twist, complaints by Vanke to the securities regulator and Shenzhen’s stock exchange. The comparison with Vanke suggested that some were “over sensitive” to his stock purchases, Lu said.

Anbang’s Role

Anbang, Minsheng’s biggest shareholder since 2014, is known for a buying spree including an aborted bid for Starwood Hotels & Resorts Worldwide Inc. that would’ve been the largest Chinese acquisition of a U.S. firm. Besides Anbang’s global investments, the company’s real estate and financial services holdings in China include a stake in Vanke.

Speculation that a battle could be looming at Minsheng has been fueled by Lu’s doubling of his shareholding to 4.6 percent, a deal struck last month by two shareholders -- Orient Group Inc. and Huaxia Life Insurance Co. -- to act in concert, and a looming board reshuffle.

While Lu said his purchases have “nothing to do with any board re-election,” JPMorgan Chase & Co. bank analyst Katherine Lei took a different view in a note this week, saying three shareholder groupings may compete for seats. These are Lu, Orient Group and Huaxia, and a third major shareholder, New Hope Group.

20-Year Peace

Still, Minsheng won’t face any “hostile takeover,” the analyst said, adding that founding members of the bank including Lu have been committed to the stability of China’s first private lender for 20 years. Anbang’s Chairman Wu Xiaohui has said that his company’s stake is only a financial investment, indicating that Anbang “will not fight for control,” she said.

A Beijing-based press official at Anbang couldn’t immediately comment. The company held 17.8 percent of Minsheng Bank as of the lender’s 2015 annual report.

Minsheng Bank’s board is overdue for an election after a three-year term ended in April 2015. The China Banking Regulatory Commission is yet to approve an application by Anbang to appoint a voting director.

“Minsheng has been run well with its diverse ownership structure for years,” Lu said in the interview on Tuesday, adding that “Anbang doesn’t control Minsheng.”

Founded in 1996 by 59 private investors including Lu and pig-feed tycoon Liu Yonghao, the owner of New Hope Group, the bank has faced challenges including former President Mao Xiaofeng resigning early last year amid an investigation by the authorities. The lender’s market value is about $49 billion.

Lu’s Ventures

The cost of Lu’s purchases were calculated based on filings to the Hong Kong stock exchange. He declined to say whether Oceanwide, a business spanning real estate, energy and investments in financial companies, will buy more and didn’t say how the share spree was funded.

Shares of Minsheng rose 1.4 percent as of 2:24 p.m in Hong Kong to the highest intraday price in a year, extending its 2016 gain to 4.3 percent. That represents about 0.8 times the bank’s book value -- about average for Chinese lenders listed in the city, but lagging the index that tracks the biggest Hong Kong-listed banks. Minsheng’s A-shares on the mainland are priced at about 1.1 times. 

While expectations for shareholders such as Lu to keep boosting their stakes may support the share price in the short term, one risk is that the CBRC could deny an approval that Anbang needs to remain a major shareholder, which would require the insurer to sell down to below 5 percent, JPMorgan’s Lei said in the note.

— With assistance by Jun Luo

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