The battle for control of China Vanke, the mainland’s largest property developer, has become an all-out war as the company’s largest shareholder has filed a motion to remove chairman Wang Shi and nearly all of the company’s board. The move by Baoneng Group, which Wang denounced as “barbarians” when it began buying up shares in Vanke last year, could see the developer’s pioneering founder sacked in a rare hostile takeover.
Vanke revealed Baoneng’s request for an extraordinary general meeting (EGM) late on Sunday in an announcement to the Hong Kong and Shenzhen stock exchanges. The proposal by Baoneng would remove Wang, as well as CEO Yu Liang plus eight other company directors and two other executives that have built Vanke into what Wang says could soon become the only pure real estate company among the global Fortune 500.
Baoneng’s maneuver to oust Wang and his board comes soon after China Resources, the company’s second largest shareholder said that it opposed a planned share sale that would have diluted Baoneng’s stake in the developer and thwarted Wang’s attempt at keeping the interlopers away from control of Vanke.
Shareholding Feud Intensifies
In its statement, Vanke said it would reply to Baoneng’s request for the EGM within 10 days, as required by law. Many observers are speculating that the impasse could mean the end of Wang Shi’s time at the helm of China’s largest and perhaps best-known homebuilder.
The announcement by Vanke said that Baoneng has proposed removing Wang as a company director due to the executive having continued to collect salary amounting to RMB 50 million ($7.5 million) from 2011 to 2014, while he was studying in the US and the UK, and allegedly not fulfilling duties on behalf of the developer.
Share Sale Plan Runs Aground
The motion to oust Wang comes after Vanke signed a RMB 45.6 billion ($6.9 billion) agreement earlier this month with a subsidiary of the Shenzhen metro system to trade shares in the developer for sites owned by the local government-controlled company.
Vanke proposed paying for the site acquisition through a massive private offering of shares that would have made Shenzhen metro the new largest shareholder in the developer and would have diluted Baoneng’s 24 percent holding down to 19 percent.
However, the proposal was opposed by China Resources, Vanke’s second-largest shareholder who would also have seen their stake watered down. The state-owned conglomerate said last week that it had filed complaints over the share sale plan with securities regulators in Hong Kong and on the mainland.
China Resources which had long been Wang Shi’s ally and Vanke’s largest shareholder came under new leadership in 2014 when former China Merchant’s Group executive replaced the SOE’s previous chairman following a corruption scandal. China Resources, Vanke, Baoneng and China Merchants are all headquartered in Shenzhen. Unlike most Chinese publicly listed companies, Wang Shi and his management team hold a relatively small stake in the firm.
While Vanke has said that the share sale plan was approved 7-to-3 by the company board, China Resources has since issued its own statement saying that approval from two-thirds of the board, or 8 of the 11 members was necessary for any such deal to move forward.
Vanke Could Join the Fortune 500 This Year
By removing Wang and his board, Baoneng shows that it is ready to shake a developer that has prospered under its current management, even during adverse conditions.
Vanke’s core profit rose 13.1 percent in 2015 to reach a new record of 17.6 billion yuan ($2.7 billion) in a year that many other developers lost money or struggled with declining sales. The company has also been successful in its efforts to expand overseas, forming partnerships with developers in the US and UK, including investing with America’s Tishman Speyer in the landmark Lumina project in San Francisco in 2013.
At an event last week in Shenzhen Wang announced that he expects Vanke to join the Fortune 500 based on its 2015 results. Also this month the developer became the first Chinese real estate company to set up its own cross-border private equity platform, establishing Brightstone Capital Partners in New York together with a team of real estate professionals from Rockefeller Group Investment Management and Metropolitan Real Estate.