China Vanke seeks talks with parties involved in ownership tussle
Shanghai
CHINA Vanke Co, the developer at the centre of a battle for control, said it wants to communicate with the parties involved and hopes to reach an agreement over its shareholding soon.
At a briefing in the southern Chinese city of Shenzhen on Monday, board secretary Zhu Xu warned of challenges ahead as the protracted tussle creates uncertainty. The comments came a day after the company reported a 10 per cent increase in first-half profit as a recovery in its home market boosted sales. Ms Zhu also reiterated that S&P Global Ratings and Fitch Ratings may adjust Vanke's credit ratings in future due to the ownership issue.
The ownership dispute has prompted some banks to halt lending and spurred employees to resign at a double rate than a year earlier, putting Vanke in a "difficult situation", Ms Zhu said. "We hope all holders would come together for Vanke's long-term future."
Vanke has cautioned about the negative fallout from the shareholder fight that has been going on since the end of last year when Baoneng Group emerged as the developer's biggest shareholder, prompting an outcry from Vanke's management. In its earnings statement to the Shenzhen stock exchange on Sunday, Vanke said uncertainty over its stake issues has affected operations, with partners in 31 of its projects having asked for changes of terms, suspensions or possible terminations because of the ongoing situation.
The shares traded in Hong Kong rose 0.3 per cent to HK$20.30 at 11:47am local time, while the yuan-denominated A shares jumped 1.3 per cent to 24.92 yuan on the Shenzhen stock exchange.
Net income at China's largest residential developer climbed to 5.35 billion yuan (S$1.09 billion) in the six months ended June 30 from 4.85 billion yuan a year earlier, the company said in a filing to the Shenzhen stock exchange on Sunday. The profit figure missed an average estimate of 5.65 billion yuan from three analysts compiled by Bloomberg.
Revenue grew 49 per cent to 74.8 billion yuan based on Chinese accounting standards. That figure was 70.7 billion yuan using international standards, a second release to the Hong Kong stock exchange said.
"Vanke management stability remains a concern for us," John Lam, an analyst at Morgan Stanley in Hong Kong, wrote in an Aug 4 note. "Recent shareholding disputes have started to affect company operations, as suggested by the decline in July contracted sales."
The company's management is under "mounting" pressure, as the ownership tussle prompted banks and rating companies to "seriously" review Vanke's credit risks, while projects and contracts are at risk of termination, president Yu Liang said in a shareholder meeting in June.
The battle for control has attracted at least three strategic shareholders after Baoneng, a little-known Chinese conglomerate, displaced China Resources Co as the developer's biggest stakeholder. Rival builder China Evergrande Group, controlled by billionaire Hui Ka Yan, has been increasing its stake in Vanke as has closely held conglomerate Anbang Insurance Group Co. Evergrande has amassed a stake of about 6.8 per cent, according to an Aug 15 filing.
Ms Zhu said at the briefing on Monday that Evergrande didn't disclose its intention to raise its stake in Vanke.
To stave off Baoneng's unwelcome bid, Vanke proposed a US$6.9 billion stock sale to Shenzhen Metro Group as part of a restructuring that would make the southern Chinese city's train operator Vanke's biggest shareholder. The proposal has not reached consensus, Vanke said in an Aug 16 filing. Vanke's restructuring bid faces almost certain failure in its current form because it is opposed by Baoneng and China Resources, its two biggest shareholders.
The company said on Sunday that there is "no consensus yet" on the stock sale proposal. "The company is engaged in negotiation, discussion and improvement with relevant parties and hopes to push forward consensus as soon as possible," it said in the statement. BLOOMBERG
