Tianrui (International) Holding Co (天瑞國際控股) said it would not accept any takeover offers for China Shanshui Cement Group Ltd (中國山水水泥集團), because such a move would not resolve the shortcomings in China’s fourth-largest cement producer.
Two of Shanshui Cement’s largest shareholders, Taipei-based Asia Cement Corp (亞洲水泥) and China National Building Material Co (CNBM, 中國建材) — which together own about 38 percent of the company — are considering a cash offer to acquire the shares they do not already own, according to statements to the Hong Kong Stock Exchange on Tuesday.
Tianrui is Shanshui Cement’s biggest shareholder with a 28.2 percent stake.
“Asia Cement or China National Building Material had not informed us about the general offer,” Tianrui said in an e-mailed response to reporters yesterday. “We don’t think a general offer can solve the problem of Shanshui, it will be useless finally. Tianrui won’t accept any general offer.”
The proposal by Asia Cement and CNBM escalates the fight for control of the US$2.74 billion cement maker, just one week before a special meeting is due to be held, during which shareholders are set to vote on whether to replace Shanshui Cement board members.
Tianrui wants to replace seven board members, including chairman Zhang Bin (張斌), and appoint its nominees at the meeting on Wednesday next week, according to a company filing on July 8. Asia Cement and CNBM are opposing Tianrui’s plan.
“The reason why we propose to change the management is about shareholders’ interests,” Tianrui said in an e-mail. “The management’s performance is not good enough compared to the firm’s peers.”
The disputes at Shanshui Cement have sparked several lawsuits for control of another key shareholder, China Shanshui Investment Co (中國山水投資), which owns a 25.09 percent stake in the cement maker.
Shanshui Cement’s board has recommended that shareholders reject Tianrui’s proposal to alter its composition, saying the changes and the chairman’s ouster would breach contracts and mean that notes might have to be repaid immediately at 101 percent.
Shanshui Cement does not have the capital to do that, it said, having already spent US$371.1 million to buy back its securities for next year and US$442 million on its 2017 securities this year. Its US$500 million of 7.5 percent 2020 bonds have risen steeply this week to trade at US$0.936 on the dollar compared with US$0.8536 at the end of last week.
Any takeover by Asia Cement and CNBM would be “positive, as they would be a much better credit counterparty than either Zhang or Tianrui,” Lucror Analytics Pte Singapore-based analyst Trung Nguyen said. “The cement industry in China is also in a consolidating phase, so the takeover isn’t a surprise.”
Institutional Shareholder Services Inc and Glass Lewis & Co, which offer proxy advisory services to global asset managers, earlier this month recommended that investors vote against Tianrui’s resolutions at the meeting on Wednesday next week, saying that Tianrui had not provided any justification for its move.
“The recommendations are fair and reinforce our belief that the existing board continues to represent the best interests of the company,” Shanshui Cement executive director Li Cheung Hung (李長虹) said via e-mail on Tuesday. “We encourage our shareholders to take this into consideration when they vote.”
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