Billionaire Huang Guangyu (黃光裕), fighting from jail for control of GOME Electrical Appliances Holdings Ltd (國美電器), may seek to sell 400 privately owned stores to the company to increase his stake.
Huang could offer to take shares or bonds in exchange for the stores, Zou Xiaochun (鄒曉春), who works as a corporate lawyer for GOME’s jailed founder, said in a Sept. 11 interview in Beijing. Huang retained personal ownership of part of the appliance chain’s network when it listed in Hong Kong in 2004.
A sale would increase GOME’s outlets by about half and boost Huang’s stake in China’s second-biggest electronics retailer from the current 36 percent. Huang, who resigned from the board and was sued by GOME after his arrest for graft, is seeking to oust Chairman Chen Xiao (陳曉) and force the company to scrap a plan to sell shares that might dilute his stake.
“How much of an advantage these stores would be for GOME depends on the locations, quality and valuations,” said Winnie Fong, an analyst at Taifook Securities Group in Hong Kong. “For now, investors are just waiting to see the outcome” of a shareholder meeting on Sept. 28.
Shares in GOME rose 1.4 percent to HK$2.23 as of the midday break in Hong Kong trading. The stock has dropped 21 percent this year, compared with a 0.9 percent decline for the benchmark Hang Seng Index.
Suning Appliance Co (蘇甯), China’s largest home-appliance retailer, had 1,075 stores as of June 30, compared with 740 for Hong Kong-listed GOME. Huang’s privately held GOME Group, which includes Beijing Eagle Investment Co (北京鵬潤投資), Beijing GOME Electrical Appliance Co (北京國美電器有限公司) and GOME Electrical Appliance Retail Co (國美電器零售有限公司) has almost 400 stores, Zou said.
Huang, who is serving a 14-year sentence for graft, has said he will end procurement and management agreements between one of his wholly owned companies and GOME should shareholders vote against his proposals at a meeting on Sept. 28, the retailer said in an Aug. 30 statement.
Under existing agreements, GOME earns fees from the group companies for supply, purchase and management services. GOME will cease to get any fees from the unlisted companies when the agreements are terminated, according to the statement.
“This is a bizarre dance from Mr Huang,” GOME said in an e-mailed reply to questions. “Just two weeks ago we got a letter from him threatening to terminate management contracts for the unlisted business owned by him. Now his people say they want to inject them into the listed group.”
Zou said Huang, 41, wants GOME to open stores at a “quicker pace” as well as acquire brands.
Suning “is running toward the finish line and GOME is just walking slowly,” Zou said. “China’s electronics retail market is fast developing and we need to be racing to get as much market share as possible.”
Zou will be traveling to Hong Kong this week, aiming to speak to investors, he said, declining to identify whom he’s scheduled to meet. He communicates with Huang through letters, Zou said.
Huang was ranked the second-richest person in China in 2008 by Forbes Asia, with an estimated fortune of US$2.7 billion. He topped the Hurun Report’s China Rich List that year with an estimated net worth of US$6.3 billion.