China Vanke Moves to End Potential Takeover Battle Within Weeks

20 Jan 2016 | Author: | No comments yet »

China Vanke Moves to End Potential Takeover Battle Within Weeks.

SHANGHAI— China Vanke Co. 000002 10.00 % is aiming to put an end to a rare, unsolicited takeover effort by a Chinese rival to end months of speculation over the future of the world’s largest home-builder by sales.Shares in Japan fell Monday amid worries that the central bank will be reluctant to expand its easing program in the coming year, while in China, property and brokerage shares surged.

Hong Kong stocks edged higher amid thin trade by the lunch time break on Monday, as investors adopted a cautious tone heading into the holiday-shortened Christmas week. The company said Monday in a statement to the Shenzhen Stock Exchange that it will disclose details of a restructuring plan, which could involve a stock issue and asset purchases, no later than Jan. 18.

Japan’s Nikkei Stock Average NIK, -0.37% fell 0.3%, adding to its 1.9% decline on Friday when the Bank of Japan announced tweaks to its current bond buying program. The Hang Seng Index rebounded from losses earlier in the session to trade 0.3 per cent higher at 21,21,814.42, while the Hang Seng China Enterprises Index was up 1.3 per cent to 9,761.28. Turnover was relatively thin for the morning session, with HK$34 billion worth of shares changing hands, compared with Friday’s full day turnover of HK$75 billion. “As we head into the final two weeks of the year, the limited year-end liquidity will be something to keep a watch on, particularly during the holiday periods of Christmas and New Year’s Eve,” said Bernard Awe, an analyst for IG Group. The move by Vanke to issue new shares is widely seen by investors to be a poison pill, or a move to block an unsolicited takeover by Baoneng Group, a privately-owned property developer and financial-services group based in Shenzhen. Airlines stocks pulled higher on expectations of lower fuel costs, after the West Texas Intermediate (WTI) crude futures for January delivery hit a seven-year low of US$34.39 a barrel on Friday, before settling the day at US$34.73 a barrel.

As of Dec. 11, Baoneng Group owned a 22% stake in Vanke through two of its subsidiaries—Shenzhen Jushenghua and Foresea Life Insurance Co.–while China Resources owned a 17% stake, according to stock-exchange filings. According to Chinese securities laws, once a bidder owns 30% of a listed company, it shall issue a tender offer to all the shareholders of the listed company to purchase all or part of the company’s shares. Speculation over a potential corporate takeover fight has sent Vanke’s shares that trade in mainland China up by two-thirds over the past month, at a time when China’s property sector remains weak. Analysts say the corporate fight over China Vanke, which said it has plans to issue an undisclosed number of new shares, has boosted expectations that the property sector will remain attractive for big fund managers.

As of Friday, Vanke’s shares listed in Shenzhen and in Hong Kong were valued together at about 263 billion yuan, or US$40 billion. “The reason for not welcoming Baoneng is simple: He lacks credibility,” Mr. Wang cited Baoneng’s poor track record of developing projects, noting that Baoneng’s property transactions totaled just billions of yuan last year.

Recent stake increases in financial blue chips are also boosting sentiment in China—brokerage firms were up including Citic Securities 0267, -0.58% and GF Securities 000776, +2.82% , which gained than 3%. “Insurance firms have allocated more capital in financial blue chips” and “this could be the catalyst for inflow of new funds by year-end,” said Xiao Shijun, an analyst at Guodu Securities. Among deals by insurers earlier this month, Anbang Insurance Group raised its stake in Sino-Ocean Land Holdings, and acquired a 5% stake in China Vanke.

In a stock-exchange filing, Jushenghua, which is 67%-owned by Baoneng, said it financed its purchase of Vanke shares by selling wealth-management products, which are usually short-term investment products in China, to investors. A spokesman for the China Securities Regulatory Commission said it wouldn’t intervene in the Vanke share purchases “as long as they abide by related laws and rules.” In other currencies, China’s central bank guided the onshore yuan stronger against the U.S. dollar, breaking 10-straight sessions of setting the reference rate weaker.

In Tokyo, shares of Toshiba Corp. 6502, -9.81% plunged 10% after the firm said it is likely to post a net loss of roughly ¥500 billion in the current fiscal year, owing to heavy restructuring costs after an accounting scandal. The company has said Guo was assisting in government investigations unrelated to the company, and the chairman had since reappeared at a company event last Monday.

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