China’s Wahaha heiress takes Hong Kong penny stock on a roller coaster ride

A failed takeover bid by Kelly Zong for China Candy has sent the penny stock into a free fall

PUBLISHED : Monday, 17 July, 2017, 6:57pm
UPDATED : Monday, 17 July, 2017, 10:58pm

An aborted acquisition deal by the heiress of Chinese beverage giant Hangzhou Wahaha has sent loss-making China Candy, a Hong Kong penny stock, into a free fall.

The candy maker’s share price has plummeted 70 per cent from 53 HK cents to 16 HK cents since Friday. It marked an abrupt end to a dizzying 400-per cent bull run since April following the announcement of the potential takeover bid by Kelly Zong Fuli, once dubbed “China’s richest daughter”.

The only scion of billionaire tycoon Zong Qinghou, who had topped China’s wealth list in 2013, made a rare move by using her personal social media account to disclose her failed attempt to buy out the little-known Hong Kong firm.

“We feel deeply sorry for the lapse of the offer ... but this is a positive and constructive exploration, allowing us to obtain some valuable experience,” Kelly Zong wrote in a post last Friday on Sina Weibo, a popular microblogging site.

The China Candy deal was the latest bid by the 35-year-old Wahaha heiress to control a listed firm through acquisitions. Her 71-year-old father’s beverage behemoth, better known in the West for its broken pact with France’s Danone in the 1990s, remains private since it was founded 30 years ago in the coastal city of Hangzhou.

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A lack of “acceptance to the offer” was cited as the reason for the lapse.

“It is a bitter lesson for her to learn,”said Zhu Danpeng, an associate with China Branding Institute.

In April, investors keenly piled into China Candy as speculation ran rife that the mainland sweets producer was tipped to become the only listed entity to be run by the young woman groomed to take over one of China’s biggest private business empires.

That was despite the fact that the Fujian-based company has been bleeding for two straight years since listing in 2015, with its share price hovering between 20 HK cents and 10 HK cents.

It is a bitter lesson for her to learn
Zhu Danpeng, China Branding Institute

A week after Kelly Zong’s official tender offer, China Candy’s shares skyrocketed to as high as 86 HK cents on May 22.

“Kelly Zong has been seeking to build up her own business for some time,”said Shen Meng, an executive director with investment bank Chanson & Co.

“She has vastly different management styles from her father, who is a typical Chinese entrepreneur who wants to have an eye on everything, big or small.”

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Late last year, the Financial Times reported that Hongsheng Beverage, a major Wahaha subsidiary headed by Kelly Zong, has approached banks in Hong Kong about a possible takeover offer for New York-listed dairy group Dean Foods, though no further updates have been made available.

The businesswoman, unlike many of the millennial offsprings of Chinese entrepreneurs, has played an active role in her father’s business since graduating from Pepperdine University in California in 2004.

She has vastly different management styles from her father, who is a typical Chinese entrepreneur who wants to have an eye on everything, big or small
Shen Meng, Chanson and Co.

She was dubbed “the most diligent princess” for her devotion, and by 2015, had already made it into the elite club of the top 20 global billionaires under 35, alongside Facebook founder Mark Zuckerberg.

But it is not always plain sailing.

With rising incomes, Chinese consumers have increasingly opted for Western or Taiwanese beverage brands by Coca Cola and Uni-President over Wahaha, whose success rested much on its low- to mid-end bottled water and drinks.

Wahaha’s stalled growth has also seen Zong Qinghou’s ranking drop on the rich list, with his fortunes shrinking to US$7.2 billion this year, from US$11.6 billion in 2013.