More Plot Twists in Gome Appliance Boardroom Drama
Sep 22, 2010
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More plot twists came this week in the ongoing boardroom drama between Chinese retail giant Gome Electrical Appliances and former chairman Wong Kwong Yu (currently serving jail time for bribery and insider trading, but once considered to be one of the richest men in China).
Gome filed a letter of complaint with the Hong Kong Securities and Futures Commission in response to, according to a Gome statement, "multiple press reports regarding purported offers of incentives for certain investors buying votes in support of the Wong family."
Gome's statement today (Sept. 22, 2010) added that, "Any further comment at this time would be inappropriate."
The Gome/Wong relationship had been rocky since Wong stepped down in 2008 to stand trial. Wong was convicted on several counts and began serving jail time in May 2010.
But the conflict escalated on Aug. 5, 2010, when Gome filed legal action against Wong for alleged breach of fiduciary duties and breach of trust.
Within hours Gome received letters from Shinning Crown Holdings Inc., which is wholly owned by Wong and is a substantial shareholder in Gome, calling for the board to drop a recent general mandate (which Wong originally voted for) and replace the chairman and another board member with new members nominated by Wong. Gome scheduled a general special meeting for Sept. 28, 2010, to vote on the proposals.
But in August several media reports appeared to show support for the current leadership at Gome and little for Wong.
Wong's answer was an ultimatum issued from his jail cell: an Aug. 27 Termination Letter that said, unless the Sept. 28 vote went his way, Wong would remove the Gome stores he owns from the Gome Appliances retail chain. While some media estimates put the Wong-owned stores at 35% of Gome Appliances' business, Gome said the termination would not adversely affect the Listed Group, "and indeed is expected to have a number of benefits to the Listed Group in the future."
The next development: a Monday report in China's The Standard said that important Gome investor Bain Capital had "signaled it is not aiming for a fight."
Bain - which had supported the current board members in statements as late as Sept. 16 - was said to be in talks with Wong's wife that could end with Bain switching sides in the conflict.
Earlier this week, the 21st Century Business Herald and other media reported that other incentives were being offered by Wong for Sept. 28 votes.
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