* Vanke showing some signs it becoming more like an SOE -sources
* Shenzhen move may end protracted corporate power struggle
* Some analysts think Baoneng may still want board seats (Recasts, adds comment from lawyer and former employee)
By Clare Jim
HONG KONG, March 31 (Reuters) - China Vanke has come under the direct control of the Shenzhen government, a move that may end a struggle for boardroom control but raises questions as to what extent the property giant will remain a market-driven company.
The Shenzhen body that oversees government-controlled enterprises said Vanke had become one of its newest members, according to the Wechat post seen by Reuters on Friday.
Vanke, China’s No. 2 homebuilder by sales, has been in crisis since late 2015 as financial conglomerate Baoneng Group built up a 25 percent stake and sought to oust management.
To counter Baoneng, state-owned Shenzhen Metro Group, a key Vanke ally, bought a 15 percent holding for $5.4 billion and this month became its largest shareholder in terms of voting rights after a proxy agreement with Vanke’s No. 3 shareholder.
The moves have widely been seen as a prelude to the subway operator gaining control of Vanke and the cause of much speculation that the firm would begin to resemble a state-owned enterprise.
Vanke has attended a recent meeting to set targets on social responsibilities, including the role of state-owned enterprises in promoting Shenzhen’s growth, the city’s supervisory body for state-owned assets said in its Wechat post.
Some current and former employees have said that since late last year when Vanke was in talks with Shenzhen Metro, the company has gradually been adopting some practices that pointed to it becoming more like a state firm.
Vanke, worth $33 billion by market value, is reorganising its party committee - which controls corporate governance - and promoting more policies proposed by President Xi Jinping, the sources said, declining to be identified due to the sensitivity of the issue.
The policies include the “One Belt, One Road” initiative - which envisions building a network of land, sea and air routes that will open new markets and education campaigns focusing on honesty, they said.
“The state-owned culture is obviously growing inside the company,” said one former senior official who left Vanke earlier this year.
The real estate sector contributes around 15 percent to China’s economic growth, and both Beijing and local governments have been keen to take a more active role in the market, particularly when sky-rocketing prices have become a serious concern for policymakers.
“There’s no market traits in this case; it’s all about interests of the state,” said Roy Qiu, a lawyer who specialises in mergers and acquisitions at DeBund Law Offices based in Shanghai.
Asked to comment on whether it could be considered a state-owned enterprise, Vanke said on Friday it had always been ‘a mixed-ownership enterprise’ and would continue to be one. It declined to comment on the reorganisation of its party committee.
Whether the more direct control by the Shenzhen government will cause Baoneng to back down remains to be seen. Some analysts believe it is still interested in gaining seats on Vanke’s board.
Baoneng and Shenzhen Metro did not respond to requests for comment.
The term of Vanke’s current board officially expired on March 27, although company rules allow the current board to serve until a new one is formed. The property developer said this week that no time frame to select a new board had been set as yet as various parties were discussing proposals.
The corporate power tussle has taken a large toll on Vanke. In addition to ceding much power to the Shenzhen government, it has also lost its title as the country’s biggest homebuilder to rival China Evergrande Group - one that it had previously held for a decade.
Some staff had left the company and projects were facing cancellation, it has said. (Reporting by Clare Jim; Editing by Anne Marie Roantree and Edwina Gibbs)