China Vanke Co (萬科) chairman Wang Shi’s (王石) bid to fend off a takeover has been thrown into doubt after the property developer’s second-largest shareholder, China Resources (Holdings) Co (華潤集團), said the proposal failed to get enough votes from the board.
Vanke’s 45.6 billion yuan (US$6.9 billion) plan to buy assets from Shenzhen Metro Group (深圳地鐵集團) by issuing new shares did not pass the board, because it needs approval from two-thirds, or eight, of the 11 members, China Resources said on Saturday in a statement.
Shenzhen-based Vanke on Friday said its board voted seven-to-three in favor of the plan after one director chose to abstain, citing a conflict of interest.
The opposition from a long-term major shareholder adds uncertainty to Wang’s effort to counter little-known Baoneng Group (寶能集團), which overtook China Resources as the company’s largest shareholder last year in what Vanke management labeled a “hostile takeover.”
If the proposal goes ahead, Baoneng’s shareholding in China’s largest listed property developer would be diluted to 19.27 percent, while Shenzhen Metro would own 20.65 percent, according to Friday’s exchange filing.
“If Vanke doesn’t reconsider the problems in the restructuring proposal and submits the same plan for a vote at board or shareholder meetings in future, China Resources would continue to vote against it to protect the interests of all shareholders,” the state-owned conglomerate said in the statement.
Vanke has a low debt burden and can use either cash or debt to finance the deal and does not need to sell new shares, said China Resources, which owns 15.24 percent of Vanke.
The proposed price of 15.88 yuan per A-share implies a discount of 24 percent to Vanke’s net assets and the land being bought, which would not contribute profit for the next two to three years, would dilute earnings, it said.
China Resources said the proposal does not give Vanke ownership in Shenzhen Metro itself and would not secure cooperation opportunities in other projects with the subway builder.
The land price also does not include taxes, which would significantly push up eventual costs for Vanke, it said.
Vanke defended the proposal in a separate statement, saying it expected the deal to bring “continuous quality project resources” in key Chinese cities at “reasonable” prices and that becoming a major Vanke shareholder, was the only consideration Shenzhen Metro would accept.
The two projects being acquired were the “best two land sites in Shenzhen [China]” — a city where developers are finding it increasingly difficult to obtain land — and would become an important source of profit for Vanke, board secretary Zhu Xu (朱旭) said in the statement.
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