Poly aborts CIIC takeover amid lawsuits
Poly Development Holdings has called off its HK$2 billion acquisition of China Infrastructure Industries Corp (CIIC) following lawsuits and disputes among various parties at the companies.
Since Poly disclosed the cancellation of a share placement related to the acquisition on August 17, its share price has plunged 74.6 per cent from HK$1.26 on August 18 to 32 HK cents yesterday, amid some of the heaviest trading in its history.
The stock had soared 1,367 per cent from 9 HK cents on December 31 to HK$1.34 in mid-July on hopes the acquisition would transform the loss-making trader of fuel, metal minerals and office equipment into an infrastructure equipment supplier cashing in on China's infrastructure boom.
At a Poly board meeting on Monday, Danny Wong, a Poly executive director and CIIC's owner, informed Poly of legal proceedings on the mainland involving CIIC's subsidiary, Zhengzhou Dafang Enterprise.
He also discussed potential legal proceedings between CIIC and Li Rongsheng, another executive director of Poly, according to Poly's announcement.
Mr Li, a mainland economist, is the legal representative of Zhengzhou Dafang and a founder of some of CIIC's infrastructure equipment businesses. He was appointed a Poly executive director on June 17, about the time Poly was negotiating the acquisition of CIIC.
Also on Monday, Mr Wong resigned as Poly executive director 'to pursue his other business engagements' after being appointed to the post on June 16. Mr Wong is the chairman of the National Investments Fund, a loss-making Hong Kong-listed investment company.
He also informed Poly on Monday that there were possible material disputes relating to a breach of undertakings and representations involving Mr Li and two mainland companies, Zhengzhou Dafang and Suzhou Dafang Vehicle.
Mr Li is also the legal representative of Suzhou Dafang, a mainland infrastructure equipment company owned by Mr Wong through CIIC and his other companies.
'At the same meeting, a non-binding resolution was passed that Mr Li be requested to abstain from carrying out his duties as a director of the company until the details of the disputes and legal proceedings have been clarified,' said Poly's announcement.
If Poly's acquisition of CIIC had succeeded, Poly would have renamed itself China Infrastructure Industries Corp to reflect its new identity as a mainland infrastructure equipment supplier. In its troubled history, Poly has suffered scandals and changed its name and line of business several times.
In 2000, when Poly was a toymaker called Hung Fung Group Holdings, then chairman Chan Chun-hung was arrested by the Independent Commission Against Corruption over a HK$90 million credit bribery scam. Chan was sentenced in 2002 to four years in jail for fraud.
Poly's current management could not be reached for comment.
