Caixin
Jan 12, 2017 07:33 PM
FINANCE

Chinese SOE Regulator Tells Conglomerate to Withdraw From Fight for Control of Vanke, Sources Say

(Beijing) — State-owned China Resources is being told by Beijing to back away from a contentious corporate takeover battle involving leading home developer Vanke, of which China Resources is a major shareholder, sources close to the situation told Caixin.

The central-government-owned conglomerate is said to be selling its holdings in Vanke, which has been fighting a hostile takeover by real estate firm Baoneng Group. The developer has sought help from the government of Shenzhen and invited a local state-owned enterprise (SOE) to become its majority shareholder, hoping to thwart Baoneng’s bid. But the proposal was blocked by opposing shareholders, including China Resources, whose holdings in Vanke would have been diluted.

China Resources has been reduced to being the second-largest shareholder in Vanke, holding 15.31% of its shares. Two Baoneng subsidiaries combined hold about a quarter of the firm and are jointly considered its biggest shareholder.

The shifting balance of power had earlier seen China Resources team up with Baoneng last year to resist a proposal made by Vanke’s management team, which would have made Shenzhen Metro, a subway operator owned by the city government, Vanke’s majority shareholder. Vanke called off the plan in December, citing unresolved conflicts between major stakeholders.

The State-Owned Assets Supervision and Administration Commission (SASAC), which regulates central SOEs, including China Resources, frowned on the way that China Resources responded to the fight between Baoneng and Vanke, according to sources close to the situation.

China Resources was told to cooperate with the Shenzhen government to solve the Vanke problem, the sources said. The attitude from the SASAC was clear — that “a centrally administered SOE should not compete for profit with the locals,” a source said.

This most likely means China Resources will sell some, if not all, of its holdings in Vanke to Shenzhen Metro, because the blocked proposal was supported by the Shenzhen government, according to the sources.

Vanke suspended the trading of its shares on Thursday on the grounds that China Resources was planning on a “significant event” that will affect its holdings in Vanke. The announcement said the plan’s details were still being worked out.

China Resources had been in talks with Shenzhen Metro about selling its Vanke holdings, but has not been able to reach an agreement over price, according to sources close to the situation.

Vanke’s A-shares and H-shares closed respectively at 20.4 yuan ($2.94) and HK$18.6 ($2.40) respectively on Wednesday.

Contact reporter Wang Yuqian (yuqianwang@caixin.com)

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