Mortar attack

Shareholders swap blows at Shandong firm


Shanshui founder Zhang Bin

When the authorities green-lighted China’s answer to House of Cards, its producers drew on real events for some of their inspiration. As we wrote in WiC362, the wildly popular In the Name of the People is supposed to underscore the ongoing importance of Xi Jinping’s anti-graft campaign, portraying corruption and infighting in the fictional Handong province. However, life ended up imitating art a few weeks after the show was first aired at the end of March, when corporate infighting at Hong Kong-listed Shanshui Cement turned into a violent brawl in Shandong.

In the TV show, imposter policemen drive bulldozers into a garment factory to evict workers following a dodgy deal between the company and local government.

In real life, representatives from Shanshui’s board of directors and 600 supporters used a bulldozer to force their way inside the company’s headquarters at four o’clock in the morning earlier this month. A pitched battle ensued involving accolytes of former general manager Mi Jingtian, who had been ousted in January and claims to represent Shanshui’s Party committee. Mi and his loyalists retaliated with pepper spray, water guns and smoke bombs before hundreds of police took control.

According to Caixin Weekly, chairman Liu Yiukeung and chief executive Li Heping were both detained on public order violations.

Under Mi’s auspices, the Shanshui’s Party committee then issued a notice recommending payments of Rmb1.2 million to 13 members of staff who had “successfully defended the building” from “fierce thugs armed with sticks, axes, stones and other weapons”.

Their attackers (or the mob, as the notice defined them) had a slightly different interpretation of events. In a statement to the Hong Kong Stock Exchange, Shanshui said board directors were “held against their will by a group of unidentified people led by Mi Jingtian” before being released by local police. “I was at the scene,” chairman Liu told the South China Morning Post. “My shirt was pulled and I was beaten by gangsters.”

“Our premises have been illegally seized by the sacked managers and their associates,” he complained.

Four main shareholders have been battling for control of the cement maker, slowing efforts to restructure over Rmb10 billion ($1.45 billion) of debt. The chairman Liu is also the court-appointed receiver representing one of the leading shareholders, Shanshui Investment. This vehicle holds shares owned by employees and founder Zhang Bin, who has tried to block the largest shareholder, Tianrui Cement, from taking control since it made a hostile takeover in 2015. Tianrui, based in neighbouring Henan province, became Shanshui’s largest shareholder after building up its stake to just over 28%. It then ousted Zhang and tried to launch a rights issue to rebuild the company’s freefloat and raise funds to restructure Shanshui’s debt.

Mi took over in Zhang’s place but he clashed with Tianrui over the plan for the heavily discounted rights issue, which would dilute employee shareholders massively. He was sacked but he has refused to leave his post.

Tianrui has taken the issue to the Hong Kong courts, trying to force the local mayor to help it wrest back control of company assets.

Analysts have suggested that the recourse to the Hong Kong judicial system is a telling indication of the hurdles Tianrui has faced in Shanshui’s hometown of Jinan, whose municipal government formerly owned the cement manufacturer. And for netizens, the struggle has all the hallmarks of a plotline from In the Name of the People. “Ding Yizhen [the TV show’s corrupt deputy mayor] is behind the scenes,” one suggested. “Does Secretary Dakang [the show’s Party secretary, and a man obsessed with GDP growth] know what’s been going on?” asked another. Tianrui has soldiered on with its bid to take control of the cement firm and Shanshui’s board has renewed its approval for a share placement.

It has also returned to the Hong Kong courts seeking an injunction against former management staff claiming to be directors and preventing them from entering company buildings or removing property. In the meantime, Shanshui’s shares remain suspended (as they have been since April 2015) and creditors appear no closer to getting their money back.

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