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November 11, 2016

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Evergrande raises holding in Vanke

PROPERTY developer China Evergrande Group has bolstered its hand in a tussle for control of China’s largest home builder, spending more than US$600 million to raise its stake in China Vanke Co to 8.29 percent.

The move by industry No. 2 Evergrande on Wednesday to buy a further 1.45 percent of Vanke sent the latter’s shares sharply higher.

While Evergrande said the deal was “an investment,” without further comment, analysts said it gave the highly acquisitive firm more bargaining power in a saga that has convulsed Vanke this year.

In August, Evergrande spent US$2.2 billion buying nearly 7 percent of Vanke — without ever disclosing exactly why — and taking a central role in a battle that sees Vanke seeking to ward off a potential takeover from financial firm Baoneng Group, its biggest shareholder.

Vanke jumped over 5 percent to an 11-month trading high yesterday in Hong Kong. The company declined to comment, while Evergrande didn’t comment beyond a stock exchange filing notifying its purchase.

“Evergrande is a touchstone for Vanke’s management and major shareholders,” said RHB Research analyst Toni Ho. “Holding a larger stake would allow it (Evergrande) to sell at a better price later, or gain more business opportunities with these (other shareholder) parties.”

While Evergrande’s intentions toward Vanke remain unclear, some analysts have said it might seek seats on Vanke’s board at the latter’s next annual shareholder meeting in March. The meeting is likely to be key in determining the future of Vanke, worth more than US$40 billion by market value.

Fearing a hostile takeover bid by Baoneng, Vanke’s management announced in June a US$6.9 billion deal with white knight Shenzhen Metro Group Co. Both Baoneng and Vanke’s second-largest shareholder, China Resources Co, have said they would oppose the deal.

Evergrande itself has captured investor attention after amassing US$57 billion in debt, almost six times its market value, on corporate mergers and land acquisitions. Its shares edged up 0.2 percent yesterday, while the Hong Kong index rose 1.9 percent.

While listed in Hong Kong, Evergrande said last month that it’s planning a backdoor listing in China’s mainland by injecting almost all of its property assets into a Shenzhen firm, a move to make it easier to raise funds.


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