China property firm blames takeover for tough conditions

China's biggest property firm Vanke on Monday blamed a takeover it is trying to fight off for worsening business conditions, even as it reported higher profits.

Bosses of Vanke, China's largest residential developer by sales, have for months been trying to stave off what would be the country's first hostile blue-chip takeover, after private conglomerate Baoneng bought a stake of more than 20 percent, becoming its biggest shareholder.

Chairman Wang Shi and his executives currently own only around 0.2 percent of the 270 billion yuan (around $40 billion) firm.

But they retain a tight grip on it by virtue of their positions, and have proposed a controversial asset swap deal with a state-owned subway operator that would heavily dilute existing shareholders.

Analysts say that takeovers are crucial to efficient markets and the allocation of resources.

But in its earnings statement to the Hong Kong exchange, where it is listed, the company said the battle had "caused negative impacts on the normal operation of the Group".

From June to August, 31 land acquisition projects and five property management schemes have been terminated, suspended, or had renegotiations sought due to the fight, the statement said, adding the firm also faced “tightened credit conditions” from banks.

But surging Chinese home prices saw its earnings jump 48.8 percent in the first half to 74.8 billion yuan, it said.

The company said it “could not rule out the possibility of future results being affected by the shareholding issue”.

Employee resignations were running at double the rate of a year ago, putting the firm in a "difficult situation", company secretary Zhu Xu told a briefing in Shenzhen, according to Bloomberg News.

Another property firm, Evergrande, has stepped in to buy a stake of nearly seven percent in Vanke -- worth nearly $3 billion -- but has yet to make its intentions clear.

By midday, Vanke was up 1.34 percent in Shenzhen and was 0.74 percent higher in Hong Kong after the earnings statement.