Across the vast and storied history of the Roman Empire, Constantine the Great remains one of the most influential rulers. Born in today’s Serbia, he unified the eastern and western parts of the empire and founded the eponymous imperial city Constantinople in 324. He also made Christianity the primary religion of Rome. A more controversial side of him, however, was the way he treated his family members. In 326 he executed his eldest son Crispus and subjected him to damnatio memoriae, or elimination from all official records. It is not known why Crispus – who’d already been named junior Caesar, or heir, at the time – incurred the wrath of his alpha male father. Some historians speculate that he plotted treason; others suggest he’d had a carnal relationship with his stepmother Fausta, who was also executed shortly after Crispus’ death.
More recently in China, Wan Long, chairman and founder of WH Group has also got into a dynastic war with his eldest son Wan Hongjian. The tussle involved an abrupt ousting of Wan junior and his repeated attempts to spill the company’s secrets, plus air revelations of his 81 year-old father’s extramarital activity.
The feuding began to surface in June when the Hong Kong-listed company announced that it had sacked Wan Hongjian, then executive director and deputy chairman. “The reason for such a removal is that the company is of the view that Mr Wan is unable to fulfil his duties of skill, care and diligence as a director due to his recent misconduct of aggressive behaviours against the Company’s properties,” WH said in a stock exchange filing.
Two months later Wan Long himself stepped down from his role as chief executive officer, although he has retained his position as chairman (for a short profile of the tycoon see WiC201). The reshuffle saw Wan’s younger son Wan Hongwei take over his brother’s roles, while former CFO Guo Lijun was appointed CEO.
Wan Hongjian joined his father’s company 30 years ago. Starting as a factory worker, he worked on the pork processing line before climbing the ranks. The latest fiasco, however, crushed any expectations that Wan Hongjian would take over the sprawling meat empire, which has been the owner of the US company Smithfield Foods since 2013 (see WiC196).
In an interview with China Business News in July, the erstwhile heir explained that his dispute with his father stemmed from their different opinions about WH’s management team, as well as its future direction. The 52 year-old had been trying to make a point of steering WH away from what he deemed an obsolete American model of production. In an overheated argument with the founder, Wan junior lost his cool. He hit the door with his fist and head-butted a glass cabinet.
“I am very, very, very scared of my father, terribly scared,” he told Sina Finance, noting that his emotional outburst led to a security guard pinning him to the ground, while his father demanded a record be kept of his “aggression” by taking photos of his blood-stained head.
The elder son added he had never had a close relationship with his dad, revealing that Wan Long has shared a home with his secretary for the past 20 years and that they have a child together. “Mother is always alone in our old home in Luohe,” Wan Hongjian complained.
On top of exposing his father’s extramarital affairs, Wan junior also accused him of corporate governance breaches. For instance, in spite of opposition from other directors, Wan Long allegedly pushed forward with a deal that enabled Smithfield Foods to charge higher prices for the hogs it exported to China but ended up costing its Chinese partner Shuanghui Development (an A-share listed unit of WH) more than Rmb800 million.
In a separate allegation, he said Wan Long did not pay tax on a $200 million payment from CDH Investments, the Beijing-based firm that helped transform Shuanghui from a state-owned enterprise into a private-sector company in the 2000s.
On August 17, five days after the appointment of his younger brother was made public, Wan Hongjian published a five-part article – via a zimeiti on WeChat – that pushed the drama to its height. “WH does not have any actual production nor operations. It is just a jigsaw piecing together of Shuanghui and Smithfield. Its function is to stealthily move the wealth held by Shuanghui offshore through dizzying financial manoeuvres and complex structures,” he wrote.
He also questioned the legitimacy of making Guo CEO of WH Group, citing his lack of English skills and a shortage of operational experience in the meat processing industry. “Even in his own area, foreign exchange hedging, he has raked up tens of millions of dollars in losses for the company in the last years,” Wan Hongjian remarked.
All of these allegations caused WH’s share price to plunge 17% in two days, shaving $2.16 billion off its market capitalisation.
On Monday WH issued a stock exchange announcement in which it resolutely denied every allegation made by its former deputy chairman, calling them “untrue and misleading”.
That categorical denial has appeared to calm the nerves of some investors, with brokerages such as Jefferies reiterating their “buy” ratings for WH. The more positive outlook was also fuelled by a recovery in pork prices in China, as well as strong demand in the US. For the first half, the company posted a 2% year-on-year decline in net profit to $539 million, while revenue rose 7% on higher sales of packaged meats and pork.
Some observers, nevertheless, remain concerned about WH’s fundamentals. In an article entitled “Behind the power struggle, Shuanghui has aged”, Jiemian pointed out that the company is losing market share in China because it is failing to capitalise on a trend which has seen Chinese people buying more fresh meat than frozen meat.
Worse, a lot of the US pork imports do not cater to local consumer demand for more unique flavours. “In the past, WH could benefit from the price arbitrage between the US and Chinese hog markets. But this strategy is not working quite so well today,” remarked Jiemian.
In fact, WH is no longer the top player in China’s pork market. The number of pigs it slaughtered dropped to 7.1 million in 2020 from 12.3 million in 2015, while the largest player Muyuan Foods processed 18.1 million hogs.
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