China Vanke Angers Shareholder: Pits SOE against SOE

 

vanke share sale

I recently showed the potential impact of the proposed share sale by State-owned China Vanke, HK 2202 to State-owned Shenzhen Metro for $6.1 to $9.2 US Billion.  New quotes from a state-owned, majority holder indicate this deal is far from done.

The MOU regarding the sale was a vague proposal to raise a wide amount from 40 to 60 Billion rmb published in a HK filing on 3/12/16 with promises of concrete details on 3/15/16. Those details have yet to materialize.  The only published Hong Kong filings were on the 3/17/16 annual meeting with a note that the A shares would continue to be suspended.  This meeting followed an online meeting, 3/15/16, the details of which haven’t been published on the Hong Kong Exchange.

Although China Vanke published results annual results on 3/13/16, nothing was mentioned of the MOU and its potential impact or the continued A share suspension, now in its 4th month. The annual report included a lot of general and specific statistics on the new “Silver Age” of real estate in China and their synchronous development with municipalities along with details on their current projects, but nothing on subsequent events.

As the above chart shows, the MOU proposal of issuing new shares to Shenzhen Metro would not only dilute the stated adversary’s holdings, Baoning, but would also drop the ownership by the longer-term, State-owned China Resources from 15.3% to between 11.16% to 12.35% depending on how much money is raised and the price assuming a 5 or 20 day average closing price.

Now Reuters reports that China Resources has started to wake up to this reality, pitting  the power of one state-owned entity against another. Fu Yuning, China Resource’s chairman, went so far as to label the lack of presentation at the annual meeting as unfortunate. Low-key words but still unusual in China for a cited source to make a negative comment.

China Vanke last closed at 19.04 HK dollars, down 2.5% while the Hang Seng Enterprises Index on which it was listed, closed up .51%.

 

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