China Vanke to buy stake worth between $6.2 to $9.2 bn in Shenzhen Metro
14 March 2016
China's biggest property developer by sales, China Vanke today signed a memorandum of understanding for buying a stake in state-owned urban transit company Shenzhen Metro worth 40 to 60 billion yuan ($6.2 to $9.2 billion).
The deal, if completed, would help Vanke in its battle for control with its largest shareholder, Baoneng Group, a small time Chinese insurance company that had aggressively acquired 22.45-per cent stake in Vanke from July to December.
The move prompted Vanke management to say that it was a prelude to a hostile takeover.
Baoneng became Vanke's largest shareholder, surpassing former largest shareholder, China Resource which holds a 15-per cent stake in the company.
China Vanke plans to fund the deal by issuing new shares to Shenzhen Metro and cover any shortfall in cash.
Although Vanke did not disclose the stake size, the share sale if fully subscribed, would give Shenzhen Metro about 20 per cent stake in China Vanke, including the newly issued shares.
The newly issued shares would also dilute Baoneng's stake, in percentage terms, and Shenzhen Metro would become China Vanke's largest shareholder.
China Vanke is likely to buy Shenzhen Metro's property project, mainly land, above leading subway stations in tier-1 cities, according to a Reuters report.
China Vanke, based in Shenzhen, in China's Guangdong province, is the country's largest residential real estate developer and since 2012, has expanded overseas, mainly into Hong Kong, the US, and Singapore.
Shenzhen Metro operates the Shenzhen Urban Rail Transit and its net current assets are around 150.3 billion yuan.