© The Financial Times Ltd 2015 FT and 'Financial Times' are trademarks of The Financial Times Ltd.
Last updated: September 29, 2010 3:41 pm
After any drawn game of football, one side is usually less happy than the other. So, too, with the stalemate on Tuesday at Gome, China’s second largest electronics retailer. Neither the board nor dissident shareholder Huang Guangyu (the imprisoned company founder and 21st richest person in China) got exactly what it was after. But to management, the result may taste a little like defeat.
True, the board survived Mr Huang’s attempts to redesign it; just 8 per cent of shareholders unconnected to Mr Huang voted to eject Chen Xiao as chairman. That vindicates the management team which restored Gome’s return on equity in the six months to June to the 2005-2008 average. The group has lost market share to larger rival Suning, but that should be blamed on the arrest of Mr Huang two years ago, which triggered a crisis of confidence among lenders and suppliers.
On the other hand, the board failed to preserve its general mandate to issue up to 20 per cent in new shares to select investors, enough to dilute Mr Huang’s holding below 30 per cent. As long as he remains above that threshold, he can call special shareholder meetings, or creep up his ownership in increments of 2 per cent a year.
Mr Huang supported the re-election of Jonathan Zhu, a representative from Bain Capital, which invested in the group while Mr Huang was awaiting trial. That suggests the possibility of reconciliation, but such is the enmity between the current and the ex-chairman that peace will probably require Mr Chen to stand aside.
Shareholders do not like the power struggle. Since May, Gome’s valuation premium over the Hang Seng has more than halved and the shares fell 4 per cent on Wednesday, against a rising benchmark. It is not too early for the board to start preparing a face-saving exit for the chairman.
E-mail the Lex team confidentially
Please don't cut articles from FT.com and redistribute by email or post to the web.