* White knight Shenzhen Metro to have 29 pct of voting
* Surpasses Baoneng financial which has 25 pct holding
* Baoneng intentions remain unclear
* Baoneng entitled to three Vanke board seats -analyst
(Adds focus on board seats, analyst comments)
HONG KONG, March 17 (Reuters) - China Vanke
said Shenzhen Metro would become its
largest shareholder in terms of voting rights after a proxy
agreement with its No. 3 shareholder, a move that gives Vanke
management the upper hand in its power struggle with Baoneng
The property giant has been at the centre of a complex
battle for boardroom control - rare among listed firms in China
- after the Baoneng financial conglomerate built up a 25 percent
stake to become its largest shareholder and sought to oust
Vanke appeared to have won a key advantage early this year
after white knight Shenzhen Metro, a state-backed firm, bought a
15.3 percent holding from China Resources Group, for some $5.4
The new deal with No. 3 shareholder China Evergrande
will further help management at the country's
second-biggest homebuilder and Shenzhen Metro assert control,
but it remains to be seen if Baoneng will back down.
A key focus will be the make-up of Vanke's board as the
tenure of current members is due to end this month. Vanke has
yet to set a board meeting to elect new directors, although the
current board will meet on March 24 to approve annual results.
"We think Baoneng is still interested to be represented in
Vanke's board but the next question is whether it will get all
the three seats as suggested by its stake," Macquarie analyst
Wilson Ho said in a research note.
Baoneng's nominations could be opposed by other
shareholders, market participants have said.
Under the deal with Evergrande, the Shenzhen Metro will have
29.38 percent of voting rights in Vanke, as well as proposal
rights and rights to participate in general meetings.
Shenzhen Metro holds 15.31 percent of the nation's second
largest homebuilder, while Evergrande, China's biggest property
developer holds 14.07 percent.
The deal is only for one year but Evergrande is likely to
sell its stake to Shenzhen Metro when its lock-up period expires
in May, said Macquarie's Ho, noting that Evergrande has already
listed the holding as 'available for sale' assets in its
Evergrande, Vanke's biggest rival, declined comment on why
it had entered into the proxy deal with Shenzhen Metro. It has
never explained why it built up its holding last year.
Baoneng officials were not available for comment.
The financial conglomerate suffered a blow last month after
China's insurance regulator banned Yao Zhenhua, chairman of
Foresea Life, an unit Baoneng used to purchase Vanke shares,
from the insurance business for 10 years, citing violations in
its use of insurance funds.
Vanke Shenzen-listed shares climbed 2 percent on Friday
while its Hong Kong shares stock was trading 0.6 percent lower.
Its bonds were trading slighter higher.
"While there may not be any imminent impact, we would expect
that creditors would prefer a strong shareholder such as
Shenzhen Metro over highly-leveraged Evergrande," MUFG
Securities strategist Rick Mattila said in a note to clients.
(Reporting by Clare Jim; Additional reporting by Umesh Desai;
Editing by Edwina Gibbs)