Developer running out of time to fend off hostile takeover bid
The nation's largest residential real estate developer China Vanke Co is pursuing a restructuring plan as it battles a hostile takeover attempt, and Chairman Wang Shi has contacted investment banks including Goldman Sachs Group Inc on the matter, news portal caixin.com reported on Monday.
Vanke is facing a takeover fight with its chief shareholder, Baoneng Group, based in Shenzhen, South China's Guangdong Province, which has real estate and finance operations.
In August, Baoneng replaced China Resources Co (CRC) as the top shareholder of Vanke for the first time. Since then, both Baoneng and CRC have continued to increase their stakes by purchasing shares in the open market.
Currently, Baoneng has a 22.45 percent stake in Vanke, meaning it again becomes the largest shareholder, the China Business News reported on Monday.
So far, Baoneng hasn't offered any explanation as to why it wants to take over Vanke.
But Wang has said that he didn't welcome the idea of Baoneng being Vanke's largest shareholder because the company "lacks credibility" and its ownership will have a negative impact on Vanke, the Xinhua News Agency reported on Friday.
In response, Baoneng said on its website later that day that it has "a good reputation" in the market and has always obeyed the laws.
Media reports said that Vanke appears to be pursuing a "poison pill" strategy through a restructuring that would dilute Baoneng's stake by issuing more shares via a private placement. That would discourage a takeover by Baoneng, the reports said.
Vanke has received "preliminary support" for its restructuring from the State-owned Assets Supervision and Administration Commission (SASAC), caixin.com reported, citing an anonymous source.
Wang needs the SASAC's approval if he hopes to get CRC to raise its stake again, Huang Jianzhong, a finance professor at Shanghai Normal University, told the Global Times on Monday, because the agency supervises CRC. Huang said it's a complicated process that will take some time.
Vanke is in the process of a material asset restructuring and it plans to disclose the details of that process before January 18, 2016, according to a filing posted on the website of the Shenzhen Stock Exchange on Sunday night. The company has suspended its Shenzhen- and Hong Kong-listed shares since Friday due to the asset restructuring issues.
"Wang has a real problem getting enough financial support within a very short time, as the asset restructuring plan involves a large amount of money and a complicated process," said Huang.
Under the rules of the Shenzhen Stock Exchange, Vanke has 30 days to complete its restructuring, starting from Friday when it suspended its shares. Huang said that Vanke will have to provide further details by the end of the 30-day period if it wants to continue the suspension.
"Further suspension requires the regulator's approval," Huang said. "So the time for Wang is really limited." Huang noted that Baoneng can't make further investments in Vanke during the suspension.
"Baoneng's investment is a normal activity in the capital market," Yang Shaofeng, general manager of Beijing Lianda Sifang Real Estate Consultancy, told the Global Times Monday.
Wang is at a huge disadvantage relative to Baoneng, which can sell or hold on to its stake without recording a loss, while Wang has to find investors during a short time, Yang said.
