Vanke agrees to buy Shenzhen Metro stake amid control tussle

Signs show the direction of Vanke group headquarters and Shenzhen Vanke Real Estate at its headquarters in Shenzhen.
Signs show the direction of Vanke group headquarters and Shenzhen Vanke Real Estate at its headquarters in Shenzhen.PHOTO: REUTERS

SHANGHAI (BLOOMBERG) - China Vanke Co unveiled a restructuring plan to buy assets for as much as 60 billion yuan (S$12.75 billion) as the developer's management tries to fend off a hostile takeover bid.

Vanke signed a memorandum of understanding with Shenzhen Metro Group Co to acquire a stake in a unit of the urban rail transit company for an estimated 40 billion yuan to 60 billion yuan, the firm said in a statement to the Shenzhen stock exchange on Sunday (March 13).

Vanke plans to fund the acquisition mainly by selling new shares to Shenzhen Metro, and pay cash to make up for a potential shortfall. The companies canceled a press briefing on Monday, with a Vanke spokeswoman saying the two weren't well-prepared due to time constraints.

China's largest publicly-traded developer has been in the middle of a tug-of-war for its control with little-known Baoneng Group, which emerged as its largest shareholder in December. The developer's management questioned the credibility of Baoneng and labeled its approach a "hostile takeover."

Vanke said in December it was planning a share sale, prompting speculation the move was designed to dilute Baoneng's ownership.

"If this potential asset injection is fully funded by the new share placement, the transaction should make Shenzhen Metro Group Vanke's largest shareholder," according to a Credit Suisse Group note to investors dated Monday. Vanke's "progress in restructuring should be a positive catalyst" for the company's Hong Kong-listed H shares, Credit Suisse analysts led by Jinsong Du said.

The size of the share sale and the stake to be acquired have yet to be decided, with no formal or binding agreement signed. Vanke and Shenzhen Metro are still sorting out details and there was no change in the general direction of the pact, China Business News reported, citing an unidentified person close to Vanke, referring to the canceled press briefing.

"This cooperation is a major breakthrough of Vanke's asset restructuring,'' the developer said on its official WeChat account Sunday. Shenzhen Metro is profitable and has strategic synergies with Vanke, the company said.

The transaction is pending approval from the board and shareholders, and Vanke's Shenzhen-traded shares will remain suspended. Vanke is scheduled to hold an extraordinary shareholder meeting March 17 on its plan to keep the Shenzhen- listed shares halted longer for the asset restructuring plan.

The rare public spat with Baoneng, which replaced state-owned China Resources Co as Vanke's largest shareholder, drew closely held Anbang Insurance Group Co into the fray. Anbang boosted its stake in the developer to more than 7 per cent in a move welcomed by Vanke.