China Vanke Co, embroiled in one of the country’s most-high profile corporate power struggles, received a boost yesterday when its second biggest shareholder said it opposed plans to oust the property developer’s board.
Financial conglomerate Baoneng, its largest shareholder, is seeking the removal of Vanke’s board – a step it took after Vanke announced a $6.9bn deal with white knight Shenzhen Metro Group that would dilute Baoneng’s stake.
Local media had speculated that No 2 shareholder state-owned China Resources Group, which has also voiced its opposition to the Shenzhen Metro deal, was working in concert with Baoneng.
The Shenzhen bourse had also asked the two shareholders to clarify if they were working together to block the deal.
But while China Resources’ current backing of the board will help lift Vanke management’s chances of keeping their jobs, it remains unclear whether the country’s largest property developer will be able complete the Shenzhen Metro deal and fend off further shareholder pressure.
China Resources did not say why it opposed an ouster but said it would consider a future restructuring of the board “from a perspective that is beneficial to the company’s development”.
Shares of Vanke in Hong Kong jumped 4.3%, compared to a 1.8% gain in the broader market.
Vanke’s shares in Shenzhen have been suspended since December 18.
Both Baoneng, which has built up a stake of 24.3% in Vanke, and China Resources, which owns 15.2%, also issued separate statements saying that they were not acting together.
Shanghai-based UOB Kay Hian analyst David Yang said the focus was now on what the bourse would do as it could still rule that the two shareholders are working in concert which may trigger a buyout clause.
The bourse will also rule on whether it approves the Shenzhen Metro deal or not.
“The bourse’s enquiries have shown that regulators don’t only care what is happening at the corporate level, but also care about what is happening at the market level and whether small shareholders are being protected,” he said.
China’s official news agency Xinhua has been particularly critical of the saga, saying in an editorial column on Tuesday that the confrontation between Vanke management and major shareholders had descended into “irrational wilfulness” that was hurting the company’s growth, its employees as well as returns for shareholders.