China Shanshui Cement Group (00691.HK) is embroiled in a hostile struggle for control of a key operating unit with the contending parties said to have used sticks, axes, pepper spray, smoke bombs and water guns against each other.
Shanshui, formerly owned by the Jinan municipal government, has launched a slew of reforms, including the introduction of new shareholders such as Morgan Stanley, CDH China Fund and the World Bank. It has also offered shares to nearly 4,000 employees.
In July 2008 the company raised HK$1.8 billion in an initial public offering in Hong Kong.
Between 2008 and 2017, the firm brought in several new strategic investors, including central state-owned enterprises like China National Building Material Co. (03323.HK), China Tianrui Group Cement Co. (01252.HK) and Taiwan-listed Asia Cement China Holdings (00743.HK).
But the ownership structure remains highly fragmented without a controlling shareholder.
The confrontation was triggered by a share placement plan the board proposed last year.
Mi Jingtian, a former general manager at Shanshui’s key operating unit in Jinan, opposed the idea, arguing that it would dilute the stake collectively owned by the employees to about 6 percent from 25 percent.
Mi voted against the proposal and was later sacked. The board also filed a lawsuit against Mi with Hong Kong High Court.
However, Mi has always been the head of the Jinan facility. Despite being removed from the post, he continued to go to the office and run the unit.
A brutal fight broke out when a group of people representing the board led by Tianrui was sent to repossess the Jinan unit.
According to the Securities Times newspaper, a crowd of around 600 people, wearing red arm bands and white gloves and wielding sticks and axes, stormed the Jinan office at around 4 a.m. on April 8.
Several hundred people inside the facility then used smoke bombs and water guns to fight back. Nearly 1,000 local policemen were dispatched to the premises to restore order.
Shanshui’s board accused Mi of “illegal occupation and criminal actions”, noting that several of its directors had been held for more than two hours and beaten up by unidentified men before they were released through the help of local police, according to a filing with Hong Kong Stock Exchange on Monday.
The internal conflict is going to take heavy toll on Shanshui. No matter which side wins in the end, small investors are going to foot the bill.
This article appeared in the Hong Kong Economic Journal on April 11
Translation by Julie Zhu
[Chinese version 中文版]
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