Analysis the case of takeover of Vanke

Analysis the case of takeover of Vanke

I. Introduction

The share of listed companies can full circulation in the stock market, and the war aimed at equity of listed companies will be intensified. Capital predators control a listed company by equity capital operation, then to reshuffle the company's board of management and affect the company's decision. Favorable business environment and huge benefits gains from these actions. The book Barbarians at the Gate tells the story about the KKR leveraged buyout of RJR Nabisco company, since then, Barbarians is used to describe the malicious buyer. Vanke is the best real estate company in China, the price of share remains at a low price for a long time and the company also maintains a good financial position. Up to September 2015, 50 billion cash holed by China Vanke Co,. Ltd(hereafter referred to as Vanke). and asset-ability ratio is kept at a lower level. Baoneng Holding (China) co,. Ltd(hereafter referred to as Baoneng) is also a real estate enterprise, even they have the project cooperation. It is widely believe that Baoneng aims at holding Vanke to develop their own business. Baoneng recently became Vanke's largest shareholder, and the share holed has exceeded China Resources. Meanwhile, Anbang Insurance Group(hereafter referred to as Anbang) also begins raising Vanke shares. Up to now, Anbang holds 6.18% shares and will have an important influence to the acquisition. This paper will analyze the reason for this acquisition and the methods adopted by the acquisition. The measure adopted by Vanke also will be analyzed. At last this paper will evaluate the measures taken for both sides and predict the outcome of the acquisition.

II. Body

2.1 The reason for the acquisition

The assets own by Vanke is really excellent. Up to September 2015, the company has total assets of 570.8 billion RMB and monetary fund 42.7 billion RMB. Asset-liability remains about 0.77. This suggests that the assets of the company maintains in good condition. These years, the ratio of liabilities of assets remains stable, and the interest cover ratio remains about 16 times. This indicated that Vanke maintains a good long-term solvency.

The company also maintains a good operation condition. According to financial statement, in the first three quarter of this year, Vanke's operating income reached 79.6 billion RMB and net profit reached 9.54 billion. The report said, their return on equity was 7.96 %. In the current situation of the real estate market recession, Vanke Vanke still maintain a certain level of growth. This means that the company's operating condition always stay at good.

The price of the stock stay low for long time. In 2008, Vanke's average share price is about 24 Yuan. But after the stock market bubble burst, the price of share stays in 10 Yuan for 6 years. During this time, Vanke has experienced great development, so the share price is low relative to the performance of the firm.

The ownership of Vanke is over dispersion, that leads to Vanke is easily to be acquired. In the top 10 shareholders, only China Resources and HKSCC NOMINEES LIMITED hold more than 10%, and HKSCC NOMINEES LIMITED is the institutional investor. And the share holding by the top 10 shareholders is less than 50%. To make it worse, management team equity is less than 5%, this makes the company's management team cannot control the company absolutely. Also in the face of purchase, Vanke's management team is in capable. According to the structure of the equity, only 40 billion can get control of the company.

The real estate is also the main business for Baoneng, even Baoneng and Vanke has some cooperation items. Baoneng wants to take a stake in Vanke, and enter the company's board of directors, so far as overhauled the board to facilitate collaboration on a deeper level. Baoneng will get great development from the cooperation with Vanke.

With the development of the modern finance, the real estate industry will enter a new era of asset management. More and more insurance agency will invest in real estate company, even intend a launch a tender offer to the high quality real estate company.

2.2 Baoneng's acquisition measures

Leverage finance provide enough purchase fund for Baoneng. Aggregate asset management plan publicized by Baoneng's subsidiaries, and proportion of leverage finance reached 2 times. Foresea Life Insurance( one of Baoneng's subsidiaries) funded 10.56 billion to buy in 6.66% stake of Vanke. Foresea Life Insurance is not the main financing channels, JuShenghua Enterprise is the main financing channels for Baoneng. 7 aggregate asset management plan publicized by JuShenghua Enterprise provide 9.652 billion working fund for Baoneng.

In order to get for funding, JuShenghua Entterprise signed returns swap business with Huatai Securities, Galaxy Securities, Citic Securities and Guosen Securities. Stock returns swap greatly increased the leverage ratio, and the leverage ratio can reach 1:5. But the amount of the fund provided by the returns swap business is not released.

Besides institution investors, Zheshang Bank also provide a great number fund for the acquisition. Zheshang bank financial capital investment subscribed its securities information plan 13.29 billion as the preferred party, only used for JuShenghua integration to acquire non-listed financial, cannot be used for stock in the secondary market investment, nor as other information technology plan money after bad.

Baoneng raise huge fund through different ways, and buy in Vanke's share on the secondary market directly and purchase share from institution investors. By the end of the suspension, 24.62% share of Vanke holed by Baoneng and its subsidiaries. There is no doubt that Baoneng is the biggest shareholder, and can be able to enter Vanke's board of directors in the future, even can restructure Vanke's board of managemen …… 此处隐藏：9893字，全部文档内容请下载后查看。喜欢就下载吧 ……