AsiaInfo Services
08-16-2010
Wong Kwong Yu to Buy Shares Offered by Gome
SHANGHAI, Aug 16, 2010 (SinoCast Daily Business Beat via COMTEX) -- Wong Kwong Yu, the former magnate in the Chinese home appliance retailing market, is in urgent need of capitals. While the Wong family is fighting a war of words with the management team of Gome Electrical Appliances Holding Ltd. (SEHK: 0493) headed by Chen Xiao, their struggle still focuses on the controlling right of the company.
Gome is planning to dilute the stake Wong holds in the company as majority shareholder through an additional offering of 20% more shares so that the management team will have more say in the upcoming shareholder meeting, according to a person in the know.
Formerly, the annual shareholder meeting granted the board of Gome the right for the additional offering. On August 4, 2010, Wong sent a letter to Gome, asking the company to hold a temporary shareholder meeting to cancel the authorization and recall Chen Xiao and another executive director.
Although the board opposes the requirement of Wong, it must express its attitude whether to hold a temporary shareholder meeting within 21 days. To veto the proposal of Wong, the board need to have 50% voting right.
The 20% more shares to be offered by Gome include 10% to be taken over by Bain Capital. The former is looking for one or several institutional investors for the remaining 10%.
Currently, Gome has 15 billion share capitals, which will reach 18 billion after the enlargement. The company's annual report for 2009 shows that Wong holds 5.1 billion shares through Shinning Crown Holdings Inc., Shine Group Limited, Smart Captain Holdings Limited and an asset management company.
If the Wong family does not participate in the additional offering, their stake will be diluted to 28%. Meanwhile, after Bain Capital fully subscribes the 10% additional shares, the stake held by the investor and Chen Xiao will total 25%, which the Wong family is unwilling to see.
The Wong family has been notified of the news for the additional offering and is financing capitals for subscription. Calculating by the average closing price of HKD 2.6 for Gome in recent 30 trading days, the company will finance HKD 7.8 billion through the additional offering. If the Wong family does not want their stake being diluted, they need to spend HKD 2.34 billion buying shares.
Hence, the Wong family is borrowing money from friends and financial institutions. The interest rate of their short-term loans even hit double figures, citing a person close to the Wong family, saying that they have rich capitals, some of which have not been injected to Gome.
(USD 1 = CNY 6.80; USD 1 = HKD 7.77)
Source: dycj.ynet.com (August 16, 2010)
KEYWORD: SHANGHAI INDUSTRY KEYWORD: Computers & Electronics SUBJECT CODE: Electronics
Electronics/Appliance Stores
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SinoCast China IT Watch
Wong Kwong Yu
stake
additional offering
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