China’s cement war mirrors local resistance to Beijing’s decree
The mountains are high and the emperor is far away, goes a Chinese proverb. As Beijing’s push for consolidation of the fragmented and overcapacity-ridden cement sector runs up against a local business group, the age-old conflict between central decree and local resistance plays out as one of the bitterest battles for corporate control in the country ever.
Henan-based Tianrui Group mounted a hostile takeover of China’s seventh-largest cement maker, Shandong-based China Shanshui Cement Group, in April but is yet to gain control of the company’s nerve centre in Shandong, where the original bosses are putting up a tough fight, allegedly with the backing of the local government.
“The next step will be to take over all the companies [of Shanshui], repay the debt, and rebuild the business,” Li Heping, the new head of Shanshui, said last month. Li had just stepped down as chief executive of Tianrui’s Hong Kong-listed flagship China Tianrui Group Cement and was about to board a flight to Jinan to “take over” Shanshui’s headquarters and its largest factory in Shandong’s capital.
READ MORE: New Shanshui CEO confident of fighting off rivals in China’s cement war
Things only got uglier since. Ten days later, the new Shanshui board alleged in a stock exchange filing that ousted director Chen Xueshi together with a group of ‘gangsters’ had barged into the headquarters, destroyed office property and assaulted employees.
A few days later, Shandong Shanshui, the firm’s principal subsidiary controlled by ousted founder Zhang Caikui, issued in a counter-statement on Shanshui’s website saying certain people appointed by the new Shanshui board, had illegally “seized” its factory and “majorly disrupted” operations.
The root of the conflict can be traced back to April, when Tianrui Group suddenly raised its stake in Shanshui to 28.2 per cent and became its largest shareholder by snapping up its shares in the open market. This was after it had already amassed a 10.5 per cent stake in February by paying a hefty premium.
