SOE gets slice of private firm Vantone
By Xiao Sun (China Daily)
Updated: 2004-04-12 08:51

Private real estate company Vantone has agreed to let State-owned Tianjin TEDA Group become its biggest shareholder by snapping up a 27.8 per cent stake.

The move bucks a trend in which private firms had often been reluctant to let State-owned enterprises (SOEs) become their major investors.

TEDA has just completed the purchase of 308 million shares newly placed by Beijing Vantone Industry Co Ltd, Vantone Group's core business, becoming a strategic investor in the firm, Vantone sources said.

"As a private real estate company, we have to seek a suitable capital scale and valuable partners to support our expansion," Vantone Group Chairman Feng Lun told a Beijing press conference on Saturday.

He said the TEDA Group was an ideal partner for Vantone thanks to its advantage in resources and capital, as well as its market-oriented management model.

And Vantone's professional expertise in real estate development will also give the Tianjin industrial company a push in this sector.

The two sides will jointly work to both promote their brands and explore the real estate market in Beijing and Tianjin.

Beijing Vantone's total shares will be increased to 1.1 billion after the capital expansion, becoming one of the few major real estate companies with a total capitalization exceeding 1 billion yuan (US$120 million).

Feng will stay on as Vantone chairman and his team will continue to lead the management. The company will also seek international partners and private placement of equities or bonds to enter the overseas capital market at a later date, said Feng, declining to give further details.

Vantone's marriage with TEDA has created a new model for the development of the real estate business, according to industry experts.

Mao Yushi, director of the Unirule Institute of Economics, pointed out that private firms had previously often been reluctant to link up with SOEs.

It takes time to see whether such marriages can work or not, he said.

Such partnerships generally have to be built on the basis of mutual trust and benefits.

Leading managers have to be both responsible and honest to the shareholders, he said.

When private and State-owned enterprises supplement to each other in business development, they also have to iron out many institutional disparities in order to materialize these potential benefits, said Zhang Weiying, vice-dean and professor of Guanghua Management School of Peking University.

It was beneficial for Vantone to have a more diversified shareholding structure and to have to increase operational transparency after absorbing the new strategic investor.

The majority of China's more than 30,000 real estate companies are currently privately owned, with most being rather small.

And even the industry's bigger firms, such as Vantone and Vanke, often encounter fund shortages following years of rapid expansion.

Wang Shi, chairman of the Shenzhen-based Vanke Group, said the only way for a real estate firm to keep growing is by becoming more specialized and concentrating existing resources.