Controversy and drama seem to dog privately controlled city-gas distributor China Gas Holdings.
Just when an eight-month hostile takeover offer by rival ENN Energy and state-backed oil and gas major China Petroleum & Chemical (Sinopec) appeared to be faltering, and barely three weeks after former managing director Liu Minghui and former president Huang Yong were cleared of embezzlement allegations in Shenzhen, a shareholder created a furore at its annual shareholders' meeting last Thursday.
Paul Wong, the shareholder and also a Hong Kong Daily News freelance writer for the paper's personal investment section, shouted at and embarrassed management by demanding answers to book-cooking allegations that were published in mainland newspapers, but which the company had already denied in a public announcement.
After Wong failed to get a reply to his satisfaction, he smashed cups and saucers in the hotel conference room and called the police, saying he felt threatened by the firm's public relations consultants. He said he was acting on his own and not on behalf of opponents of current China Gas management.
His actions were reminiscent of a similar disruption by Andrew Fung Wai-kwong, a spokesman for China Gas shareholder Hai Xia Finance Holdings. Fung made a scene at a shareholders' meeting in April last year, at which then China Gas chairman Li Xiaoyun and former deputy chairman Xu Ying were removed from the board.
Li and Xu were representatives of Hai Xia Finance on the China Gas board. Fung claimed the government had rescinded China Gas' operating rights, which management denied.
Li and Xu's removal was on the grounds that they failed to inform the board they had advance knowledge that Liu and Huang were to be detained by Shenzhen police to help in their investigation into the alleged embezzlement of China Gas' assets. Hai Xia Finance denied Li and Xu had advance knowledge.
Liu was also removed from the board in the April shareholders' meeting.
However, according to China Gas, police wrote to Liu and Huang last month to advise them they would not be prosecuted due to insufficient evidence.
Li was president of Hai Xia Travel Agency, where Xu was vice-president. It is wholly-owned by the State Council's Taiwan Affairs Office, and provides tourist and investment services to Taiwanese travelling on the mainland.
Since Liu and Huang's detention, it has become clear to outsiders that two camps of directors were fighting for control of China Gas, which today has the largest number of exclusive city-gas distribution projects on the mainland.
According to present management, when the company's distribution business was in the early stage of development, Li and Xu contributed to the partnership by using their government links to help secure projects for the firm. They were not part of the firm's day-to-day operations.
"But that was more relevant before 2005, when using their connections with the Taiwan Affairs Office did help make project negotiations with local governments easier," a China Gas senior manager said. "Since then, the Ministry of Construction has stipulated that all city-gas projects must be awarded by open bidding."
China Gas' filings to the Hong Kong bourse showed Hai Xia Finance amassed a 10 per cent stake in China Gas in 2002 by buying shares from China Gas' former controlling shareholder Heng Fung Holdings. It has since been cut to less than 5 per cent.
Li was appointed chairman of China Gas in April 2002 and Xu was designated vice-chairman in June 2003. Liu was appointed managing director in July 2002.
China Gas' 2010 annual report said Liu was a mathematics graduate of Hebei University of Education with substantial experience working in "government authorities and Chinese enterprises". It added that he received a doctoral degree in business administration from "Preston University of the United States", which states on a one-page website that it is applying to regulators for a licence to operate.
The China Gas manager alleged that Li and Xu were the masterminds of Liu's arrest, by instigating the reporting of alleged embezzlement by Liu to the police. Li denied the allegation. Xu could not be reached.
After China Gas' share price plunged on news of Liu and Huang's detention, ENN and Sinopec offered to take it over at HK$3.50 per share.
But they have so far not raised their offer price and are waiting for Beijing's anti-trust authorities to clear their bid.
Other suitors, including Beijing Enterprises Group, an alliance between Liu and London-listed Fortune Oil; and South Korea's SK Group, have been buying China Gas shares on the open market at prices well above HK$3.50. Beijing Enterprises Group was China Gas' largest shareholder, with a 20.3 per cent stake, but in the last few days Liu has exercised share options to become the company's biggest stakeholders with 20.7 per cent of the stock. Beijing Enterprises Group has not obtained board representation in China Gas and has been silent about its intention. China Gas agreed on Friday to reinstate Liu as managing director.
The real cause of Liu's falling out with Li and Xu is not clear. The China Gas senior manager alleged that Li and Xu had asked for more money from the company, and Liu was angered by their requests. Li denied this. Liu and Xu could not be reached.
In the five years ending March 31 last year, Li took home HK$16 million from China Gas, compared with Xu's HK$39.5 million and Liu's HK$47.2 million. Another shareholders' meeting is expected as early as next month to approve Liu's reinstatement.