A battle for control of China’s biggest home builder veered into unknown territory after the industry’s No 2 player bought nearly 5% of China Vanke as “an investment”, but left investors in the dark on its future intentions.
Shares in both Vanke and its new shareholder, China Evergrande Group, jumped yesterday after the already highly leveraged Evergrande said it bought the stake for about $1.4bn.
But the move by Evergrande, with a market value of $9bn, muddies the waters of a rare public Chinese boardroom battle: Vanke, a $30bn builder of homes for the middle classes, has been busy fending off a potential hostile takeover by private financial conglomerate Baoneng Group, its largest stakeholder with roughly 25%.
Vanke’s Shenzhen-listed shares rose by their 10% daily limit before dropping back to still close up 6.5%, while its Hong Kong-listed stock gained 1.6%.
Shares in Guangzhou-based Evergrande, now Vanke’s 4th-largest investor, closed 5% higher.
Evergrande chairman Hui Ka-yan cited Vanke’s “strong results” as a reason for the investment in a filing late on Thursday.
Like Vanke, it didn’t respond to requests for comment on the move yesterday.
Analysts said they couldn’t immediately figure out exactly how Evergrande’s move might change the balance of power in Vanke’s spat with Baoneng – a tussle that has drawn scrutiny from regulators.
Some said they were waiting to see if Evergrande might increase its stake further. Unusually for a large non-state-owned Chinese company, Vanke does not have a dominant shareholder.
Last year, Baoneng displaced state-owned China Resources as Vanke’s largest stakeholder.
Vanke chairman Wang Shi opposed the move, calling Baoneng “barbarians” with no credibility, and Vanke has asked regulators to investigate the funding of Baoneng’s share purchases.
Baoneng has declined to comment on Vanke’s request.
The protracted power struggle between Vanke and Baoneng is already testing Beijing’s resolve, especially as it looks to reform its big corporations.
In a June 28 editorial, China’s official Xinhua news agency said the confrontation between Vanke’s management and its major shareholders had descended into “irrational wilfulness” that was hurting growth, employees and shareholder returns.
Evergrande’s purchase of a stake in Vanke is just the latest in a series of investments by the acquisitive developer.
In April, it said it was buying a nearly 18% stake in Shengjing Bank for $1.54bn.
This month, it completed its acquisition of a 52.8% stake in developer Calxon Group for 3.6bn yuan ($542mn).