China Vanke Co. (HK: 02202), the largest home builder in China, is undergoing a highly intensified power battle. Last Sunday, Vanke announced that its largest shareholder, Baoneng Group, requested an extraordinary shareholder meeting to oust most of the company’s board, including its Chairman Wang Shi, charging Mr. Wang with neglecting his duties between 2011 and 2014 because he spent too much time climbing mountain and studying in U.S. and U.K., while receiving a salary of more than 50 million Chinese yuan ($7.5 million).
Last Thursday, Baoneng issued a statement that clearly objected to the restructuring plan, raised by Vanke’s management to make Shenzhen Metro Group its largest shareholder by issuing new stocks. Vanke’s second largest shareholder, state-owned China Resources, almost at the same time reiterated its opposition to the deal. Those two shareholders in total own 39.59 percent of Vanke’s shares, but no official news about whether they are persons acting in concert has been released. Vanke needs approval from two-thirds of shareholders of both it's A-shares and H-shares for the deal to pass.
During its purchase of Vanke’s shares last December, Baoneng was deemed as a potential hostile takeover. Mr. Wang has attempted to introduce a white knight, Shenzhen Metro Group, to change the situation since March.
Moody’s Investors Service said late Monday that Baoneng’s proposal to remove Vanke’s directors is negative for Vanke’s credit-rating outlook. Mr. Yu, Vanke’s President, said that removing the board of directors would cause a lot of trouble to Vanke, and some of its projects are faced with the risk of cancellation.
Trading of Vanke’s A-shares in Shenzhen Exchange has been suspended since last December, and its Hong Kong listed H-shares shed 3.83 percent on Monday.