THE decision by China Evergrande Group to take a nearly 5 percent stake in China Vanke Co. introduces a new twist to the eight-month-long battle for control of Shenzhen-based Vanke, China’s largest residential property developer.

    Shares in both Vanke and China Evergrande jumped Friday after the already highly leveraged China Evergrande said it bought the stake for about US$1.4 billion.

    But the move by China Evergrande, with a market value of US$9 billion, muddies the waters of a rare public Chinese boardroom battle: Vanke, a US$30 billion builder of homes for the middle classes, has been busy fending off a potential hostile takeover by private financial conglomerate Baoneng Group, its largest stakeholder with roughly 25 percent.

    Vanke’s Shenzhen-listed shares rose by their 10 percent daily limit before dropping back to still close up 6.5 percent, while its Hong Kong-listed stock gained 1.6 percent. Shares in Guangzhou-based China Evergrande, now Vanke’s fourth-largest investor, closed 5 percent higher.

    China Evergrande chairman Hui Ka-yan cited Vanke’s “strong results” as a reason for the investment in a filing late Thursday. Like Vanke, it didn’t respond to requests for comment on the move Friday.

    Analysts said they couldn’t immediately figure out exactly how China Evergrande’s move might change the balance of power in Vanke’s spat with Baoneng — a tussle that has drawn scrutiny from regulators. Some said they were waiting to see if Evergrande might increase its stake further.

    Hui may have both strategic as well as economic reasons for injecting himself into the Vanke saga.

    “China Evergrande is hoping to have influence in Vanke, and we expect this will eventually turn into a strategic investment,” JPMorgan Chase & Co. analysts led by Ryan Li wrote in a report dated Thursday. “China Evergrande has a track record of hostile takeover attempts.”

    China Evergrande bought Vanke’s Shenzhen-traded shares through a unit for 9.1 billion yuan (US$1.4 billion), it said in a filing to Hong Kong’s stock exchange after the market close Thursday. China Evergrande cited Vanke’s “strong” financial performance as China’s largest developer as a reason for its investment, according to the filing.

    Vanke on Friday denied in a statement to the Shenzhen Stock Exchange that it leaked information about China Evergrande’s stake purchase to any media. The statement came after the Shenzhen exchange asked Vanke whether it had disclosed China Evergrande’s stockholding details before the acquirer’s announcement. The bourse said it noticed that media had reported on the purchase before the official announcement.

    Hui’s intentions may become clearer if China Evergrande continues to accumulate A shares in Vanke to reach the 5 percent ownership threshold where it could request a seat on the company’s board of directors, said Hao Hong, head of research and chief strategist at BOCOM International Holdings Co.

    “If I had to guess, I would say they want to influence the end game, plus Vanke is a good investment,” Hong said “Hui has proven to be a very shrewd businessman.”

    Unusually for a large non-State-owned Chinese company, Vanke does not have a dominant shareholder. Last year, Baoneng displaced State-owned China Resources as Vanke’s largest stakeholder.

    Vanke chairman Wang Shi opposed the move, calling Baoneng “barbarians” with no credibility, and Vanke has asked regulators to investigate the funding of Baoneng’s share purchases. (SD-Agencies)