An intensifying shareholder dispute at China Vanke has shaken investor confidence in the property developer, cut its access to bank lending and upended projects during the first half of the year, the group said.
China’s largest retail property developer, which reported a 10 per cent year-on-year increase in profit to Rmb5.35bn ($803m) for the first six months of 2016, said for the first time it was in dialogue with shareholders in the hope of resolving China’s first big hostile takeover.
Baoneng, a little-known Shenzhen-based company, grabbed headlines in December when it took a 24 per cent stake in Vanke, overtaking China Resources to become its largest shareholder. The battle has since devolved into a public dispute in which Baoneng has demanded the removal of Vanke’s directors, while Vanke has struck back with its own ripostes.
The tussle has recently attracted new players with ambiguous loyalties, such as Evergrande, which last week raised its stake in Vanke to 7 per cent, making it the third-largest shareholder and qualifying it to eventually nominate a director. Anbang Insurance earlier this year also increased its holdings to earn that privilege, and a vote for new directors is scheduled for March.
“Each shareholder’s request is different but we hope that eventually we can reach an agreement for Vanke’s long-term stability,” Zhu Xu, the company’s secretary of the board, said in Hong Kong on Monday.
Company results were mixed. Revenue from property development grew almost 50 per cent year on year to Rmb68.2bn, while the profit margin for property development also dropped 3.6 percentage points from a year earlier to 18.6 per cent.
The results dragged down its Hong Kong-listed shares half a percentage point to HK$5.22, underperforming the Hang Seng index.
The corporate raid has brought on anything but stability for Vanke. The company disclosed a long list of problems suffered in the first six months of the year that it said were due to dispute.
For example, its land acquisition efforts were shaken as “some partners worried that the advantages of the group’s brand, management and financing could not be sustained”, resulting in the delay or scrapping of 31 projects. Five other expansion projects were altered or abandoned.
Banks have reduced Vanke’s access to loans, according to its interim report, and global rating agencies have warned that the group’s corporate rating could be affected. Headhunters have targeted staff, resulting in high turnover in June and July, after Baoneng proposed the removal of the company’s directors.
Mr Zhu also noted that Wang Shi, Vanke chairman, did not attend Monday’s press briefing because he was busy dealing with the “shareholder incident”.
Vanke had hoped to sell $6.9bn in shares to Shenzhen Metro, making it the company’s largest shareholder — a measure that Vanke executives have insisted was not purely to defend from hostile parties. However, that effort was shot down by Baoneng earlier this year.
The dispute has become a landmark case for China’s corporate sector and, depending on how the government’s reaction, could promote or dissuade hostile bids for years to come, experts said.
On questions of whether Vanke had received government support for its defence, company executives said that regulators had not taken sides and that the outcome would be decided by regulation and the market.
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