A quick history lesson if you’re unfamiliar with Baoneng or Vanke.
In 2015 Baoneng, a Chinese insurance company of dubious pedigree controlled by Mr. Yao Zhenhua, began buying shares in one of China’s largest property companies Vanke. The company at the time was de facto controlled by China Resources and Vanke’s then Chairman Mr. Wang Shi.
From the initial purchases a hostile takeover took shape and this was of particular interest because neither Baoneng nor Vanke were officially state controlled entities. Other notable players included Anbang, another insurance company, Evergrande, a property developer, and the Shenzhen Metro.
When the dust had settled Vanke’s Mr. Wang was out of a job, Baoneng’s Mr. Yao was barred from the insurance industry for 10-years and Anbang’s one time Chairman and Chief Executive Mr. Wu Xiaohui was sentenced to 18-years imprisonment on charges of fraud and embezzlement. Oh, and the Shenzhen Metro had become a 30% holder of Vanke. A very involved drama, and that’s just the bits of the story we’ve been allowed to know.
As this will go down as perhaps modern China’s first major attempted corporate raid it’s worthy of study and Song Yop Kang from the Peking University School of Transnational Law in the paper highlighted today presents a closer analysis.
As this is a subject for serious China-wonks only I’ll summarize quickly. China is such a different landscape, culturally, legally and administratively from the U.S. that direct comparison with practice there and what happens (and is likely to happen) in China isn’t possible.
The key difference is hostile takeovers in more developed markets often result in control of the target being democratized for the benefit of its stakeholders. In China, had the Vanke takeover been a success, it’d have resulted in control being consolidated.
No wonder then in this case there was intervention (by whom isn’t clear) and an SOE White-Knight (the Shenzhen Metro) was found to upend the process. Without a counterfactual we can’t know if Vanke’s shareholders* have been left better, or worse, off through the process?
What we can know is that hostile takeovers are not going to be big part of China’s stock market landscape for the foreseeable future.
You can access the paper via the following link The Vanke-Baoneng Case.
Happy Sunday.
[* I’ve cast my vote. I was a Vanke shareholder when the fun began but subsequently sold out due to the poor corporate governance of their management during this process. I don’t suppose they’ve missed me?]