China Vanke, China’s largest residential property developer, is facing a possible hostile takeover attempt from its largest shareholder and its reaction will provide a litmus test of the maturity of the country’s fledgling capital markets.
In a statement to the Shenzhen Stock Exchange on Monday, the company said it will disclose details of a restructuring plan that could involve new share issuance and asset purchases, as it moves to thwart a consortium led by Baoneng Group, a privately held property-to-financial conglomerate.
Shenzhen-based Vanke said its mainland-listed shares will resume trading no later than January 18 after it halted trading in Hong Kong and Shenzhen on Friday afternoon as it announced the plan.
Speculation about a potential takeover has increased since August after a consortium of three companies acquired enough public shares to surpass Vanke's largest shareholder China Resources Group.
As of December 18, the consortium – property developer Baoneng and its affiliates Jushenghua and Foresea Life Insurance – own a combined 22% stake in Vanke, according to exchange filings. China Resources Group is the second largest shareholder of Vanke, with a 17% stake.
Vanke believes the three companies are controlled by mainland businessman Yao Zhenhua, with the move a rare example in China’s corporate culture of the private sector seeking control of a state-controlled company.
Before the suspension of share trading on Friday, the mainland-traded shares in Vanke soared by the 10% daily limit for the second consecutive day, as rumors of the takeover attempt intensified.
Vanke shares in China have risen by more than two-thirds over the past month, outperforming the benchmarks in Shanghai and Shenzhen, which were up 0.3% and 2.5% respectively.
The company, founded by mainland billionaire Wang Shi, has in recent years expanded overseas, buying a controlling stake in the 30-story Bush Tower office building in New York and teaming up with a local developer to acquire two sites in Brooklyn.
Baoneng, established in 1992, engages in a variety of businesses including property development and tourism. It claims to own more than Rmb10 billion worth of assets and serves more than 10 million customers.
In a statement published on its website last Friday, Baoneng said the group creates enormous value for society and its customers. It also has a good reputation in the market.
However, Vanke appears unimpressed by the takeover attempt. Wang Shi, chairman of Vanke, said: “The reason for not welcoming Baoneng is simple. He lacks credibility,” referring to the chairman of Baoneng Yao.
Rumours were flying in social media over the weekend that Wang, an avid outdoor sportsman, had received enough financial backing from a group of China’s state-owned enterprises and the country’s largest public funds.
Baoneng did not immediately respond for a comment on its motives.
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