Caixin
Dec 19, 2016 08:04 PM
PROPERTY

Vanke Drops $6.55 Billion Bid for Shenzhen Metro’s Property Unit

(Shenzhen) — China’s leading real estate developer, China Vanke Co., has terminated a planned 45.6 billion yuan ($6.55 billion) deal to acquire a unit of Shenzhen Metro Group, citing persistent disagreements among its major shareholders and fluctuations of Vanke’s share price.

Vanke earlier this year announced its plan to purchase Shenzhen Metro’s property unit by issuing it new shares. It hoped to make the state-owned subway operator Vanke’s largest shareholder with a 20.65% stake, which could help it fend off a possible hostile takeover by Baoneng Group.

But in a statement released on Sunday, Vanke said its share price had fluctuated markedly since July, and the parties could not reach an agreement on any adjustment to the planned deal. “Conditions are not mature to push ahead with the deal,” it said.

The company has reached an agreement with Shenzhen Metro to terminate the deal, the property developer said.

According to the deal plan publicized on June 17, Vanke would have issued nearly 2.9 billion shares at a price of 15.88 yuan per share to Shenzhen Metro in order to purchase its property unit.

The deal was strongly opposed by Vanke’s largest shareholders, Baoneng Group and China Resources. Baoneng even proposed holding a general meeting of stockholders in order to dismiss the board directors, including Vanke founder Wang Shi. The planned coup did not succeed, and the disagreement remained.

Baoneng has increased its holdings to about 25% of Vanke’s shares. China Resources holds about 15%, while another property giant, Evergrande Group, holds about 14%.

State regulations require a listed company to reset the price of its newly issued shares if it fails to move ahead with a plan to purchase new assets within half a year. Vanke’s shares have risen since the deal was first announced. Now the 2.9 billion shares that Vanke agreed to issue to Shenzhen Metro for its stake would need to be priced at 24.20 yuan per share. That would make the deal worth 69.5 billion yuan, 24 billion more than the initial plan.

Despite the termination of the deal, Vanke said the company is still optimistic about the new business model to build properties along the rail lines in its future development.

However, Vanke’s share price fell 6.06% to 21.1 yuan on Monday.

Contact Wu Gang (gangwu@caixin.com)

 

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