Opinion | Missing payments raise questions over puree maker
The deal will see Huiyuan Juice buy its major supplier, which is owned by Huiyuan's main shareholder, and is owed large sums by Huiyuan
Imagine your financial adviser suggesting you put money into a company whose revenue has grown 40 per cent, its profit has increased 30 per cent, yet 90 per cent of its revenue is trade receivables.
You would promptly slam the phone on him. What good is a profit figure if the money is not in the bag?
The independent financial adviser of Huiyuan Juice, however, does not seem to go by this rule of thumb. It is advising minority shareholders to pay HK$4.9 billion to controlling shareholder Zhu Xinli to buy a fruit puree maker that Zhu owns.
It is not for nothing that the Hong Kong stock exchange is considering tightening its grip on independent financial advisers and making them more accountable for their recommendations.
The so-called "independent" tag is quite misleading. Independent advisers do not do any "independent" investigation into the businesses and affairs of acquisition targets. Other than the audited report, they form their opinions solely on the basis of documents, information and views prepared and expressed by the management.
In return, they get a fee ranging from HK$150,000 to HK$1 million, depending on the size and complexity of the acquisition. Seven out of 10 of these advisers have been rehired by the same companies within three years of the acquisitions, according to a 2012 study by the Listing Committee of the Hong Kong stock exchange.