Shanshui Cement wins injunction against former directors

Latest twist in a takeover battle involving company chops, seized corporate offices and plants, and bond defaults

PUBLISHED : Friday, 24 June, 2016, 7:19pm
UPDATED : Friday, 24 June, 2016, 7:19pm

China Shanshui Cement, embroiled in an increasingly complex takeover fight between its largest shareholder Tianrui Group and various ousted directors, has gained an injunction banning three former directors from using the alleged stolen official company seal of its main operating unit.

The unit, Shandong Shanshui Cement Group, however, is yet to make a new seal limiting the Tianrui-led board’s capacity to effectively control the operation.

The legal move represents the latest twist in the hostile takeover battle, that has so far involved missing company chops, seized offices and plants, and bond defaults.

“The company and Shandong Shanshui are negotiating with the People’s Government of Jinan city

and the police to issue a new seal as soon as possible,” China Shanshui said in a filing to Hong Kong’s stock exchange on Friday.

Officials claimed the seal being held by the former directors “without proper authorization“ is still being used by them “for disseminating false and misleading information to the public”.

China Shanshui said it has obtained a civil ruling from the Haidian District People’s Court of Beijing, prohibiting company founder Zhang Bin and his son Zhang Caikui — both former chairman at different times — and former executive director Chen Xueshi from using or authorising others to use the seal.

The Beijing court ruling in favour of the Shandong firm comes three months after China Shanshui also began legal action against Jinan mayor Yang Luyu and deputy mayor Su Shuwei in Hong Kong.

The two are alleged to have conspired with the ousted China Shanshui directors to conceal the Shandong subsidiary’s company seals and obstructing the new board’s attempt to gain access to the Jinan plant.

Once China’s seventh largest cement maker, Hong Kong-listed Shanshui has been seen as vulnerable to takeovers due to its fragmented shareholding structure.

Rival Tianrui Group, the parent of Hong Kong-listed China Tianrui Group Cement, launched a hostile takeover in April last year.

The previous board, led by the Zhangs, attempted to liquidate the firm in a bid to fend off Tianrui’s attempt to take control of its assets.

But that was dismissed by a court in the Cayman Islands where the firm was incorporated, citing the the directors’ lack of authority to wind up the firm.

Tianrui succeeded in removing Zhang Caikui and his son Zhang Bin, as well as all other Shanshui directors, in December.

But without a new seal, it has yet to gain full control over Shandong Shanshui, and has also failed to help China Shanshui raise the financing needed to redeem a US$500 million offshore bond after a change in management control bond provision was triggered, allowing the redemption request.

With 223 million yuan in cash and 27 billion yuan worth of total assets at the end of last year, China Shanshui is now faced with repaying 15.6 billion yuan of borrowings before the year end.

Creditors have also demanded repayment of overdue loans, bonds and suppliers’ payables to the tune of at least 4.43 billion yuan, triggering a liquidity crisis that has highlighted a desperate need to restructure its debt.