CHINA Vanke’s chairman Wang Shi’s bid to fend off a takeover has been thrown into doubt after China Resources (Holdings) Co., the Shenzhen-based property developer’s second-largest shareholder, said the proposal failed to get enough votes from the board.

    Vanke’s 45.6 billion yuan (US$6.9 billion) plan to buy assets from Shenzhen Metro by issuing new shares didn’t pass the board because it needs approval from two-thirds, or eight, of the 11 members, China Resources said Saturday in a statement on its official WeChat account.

    Vanke said Friday that its board voted 7-to-3 in favor of the plan after one director chose to abstain, citing a conflict of interest.

    The opposition from a long-term major shareholder adds uncertainty to Wang’s effort to counter little-known Baoneng Group, which overtook China Resources as the company’s largest shareholder last year in what Vanke management labeled as a “hostile takeover.”

    If the current proposal goes ahead, Baoneng’s shareholding in Vanke would be diluted to 19.27 percent, while Shenzhen Metro would own 20.65 percent, according to Friday’s exchange filing.

    “If Vanke doesn’t reconsider the problems in the restructuring proposal and submits the same plan for a vote at board or shareholder meetings in future, China Resources would continue to vote against it in order to protect the interests of all shareholders,” China Resources said in the statement.

    Vanke has a low debt burden and can use either cash or debt to finance the deal and doesn’t need to sell new shares, said China Resources, which owns 15.24 percent of Vanke.

    The proposed price of 15.88 yuan per A share implies a discount of 24 percent to Vanke’s net assets, and the land being bought, which wouldn’t contribute profit for the next two to three years, would dilute earnings, China Resources said.

    Zhang Liping, an independent director on Vanke’s board who’s currently employed by Blackstone Group, didn’t vote on the proposal because the two companies are in talks about a commercial property project, according to the exchange filing. Only members directly affiliated with the companies involved in the resolution being voted on — in this case, Shenzhen Metro — should be excluded from voting, China Resources said.

    The three directors from China Resources voted against the deal, although the company agreed the assets being bought could benefit Vanke’s business, according to its statement.

    The proposal doesn’t give Vanke ownership in Shenzhen Metro itself and won’t secure cooperation opportunities in other projects with the subway builder, China Resources said.

    The land price also doesn’t include taxes, which would significantly push up eventual costs for Vanke, it said.

    Vanke defended the proposal in a separate statement, saying it expected the deal to bring “continuous quality project resources” in key Chinese cities at “reasonable” prices, and that becoming a major Vanke shareholder was the only consideration Shenzhen Metro would accept.

    The two projects being acquired were the “best two land sites in Shenzhen” — a city where developers are finding it increasingly difficult to obtain land — and would become an important source of profit for Vanke, board secretary Zhu Xu said in the statement.

    “Through this transaction, what Vanke is buying is not two land sites, but the future,” Vanke said in the statement, citing the words of an unidentified independent director.

    (SD-Agencies)