Li Hejun, once China’s richest man, gets approval from shareholders to take troubled Hanergy unit private
Hanergy Thin Film Power Group, the company whose stunning stock market performance once made its chairman the richest man in China, will be delisted from the Hong Kong stock exchange next month after shareholders approved plans to take it private.
The company said in a filing to the exchange on Sunday that 97.25 per cent of shareholders had voted in favour of the privatisation scheme in a shareholder meeting a day earlier. The vote gives the green light for the firm to delist on June 11, and paves the way for the next phase of Hanergy’s plan – to relist the unit in mainland China.
The local bourse in August last year introduced a rule that companies suspended for more than 18 months would be delisted. Hanergy Thin Film, which has been suspended for almost four years since falling foul of regulators, was given 12 months from the introduction of the rule because of its protracted suspension.
It put forward the privatisation and A-share relisting plan as an alternative, so that existing shareholders could see their shares allowed to continue to trade.
It will close another chapter in the rags-to-riches story of renewable energy tycoon Li Hejun, who was ranked by the Hurun Report as the country's wealthiest man in 2015 with US$26 billion to his name thanks to a meteoric rise in Hanergy’s share price.
But it all came crashing down when Hanergy was suspended from trading in May 2015 and faced an investigation by the Securities and Futures Commission. According to last year’s Hurun Report, Li’s fortune had shrunk to an estimated US$4.34 billion, placing him 89th in the list he once topped.
In September 2017, the SFC won an order from the Court of First Instance to ban Li from being a director for eight years for failing to disclose loans between the Hong Kong-listed unit and its parent company, Hanergy Mobile Energy Holding.
He was found by the court to have breached his duties to Hanergy’s shareholders in a number of deals and loans between the unit and its parent firm, where there was a clear conflict of interest.
A spokesman for the SFC said the authority had no comment on the privatisation.
Li’s Hanergy Mobile Energy, which together with other parties owns 59.49 per cent of Hanergy Thin Film, announced on its website in October that it planned to take the Hong Kong-listed unit private for not less than HK$5 per share in cash of share placement and then relist on China’s A-share market. That valued the company’s 42.15 billion issued shares at HK$210.75 billion.
In its official offer documents posted on the bourse’s website in December and February, however, there was no further mention of the offer price or valuation.
The official offer has no cash payment and takes the form of a share swap scheme for independent shareholders.
Their 17.07 billion shares, equivalent to 40.51 per cent of Hanergy, will be swapped into an equal number of shares of a “special purpose vehicle” set up in the British Virgin Islands.
Whether the independent shareholders can get any payout will depend on whether the special purpose vehicle can list on the A-share market.
“If the A share listing cannot be completed, the independent shareholders will be holding unlisted [SPV] shares for which there is no exchange platform for transfer,” a shareholders’ circular on the proposal said. “Even if [it] is completed, there is no certainty when and how the vehicle will be able to dispose of the A shares.”
The case highlights the insufficient protection of minority shareholders’ rights and the need to tighten regulatory oversight of Hong Kong’s listed firms, said VC Asset Management managing director Louis Tse Ming-kwong.
“Having failed to meet the stock exchange and the SFC’s conditions for Hanergy’s shares to resume trading, its controlling shareholder ought to have at least offered its minority shareholders some compensation in case the A share listing fails to come off within a certain time frame,” he added.
By effectively giving the parent company US$8.5 billion in loans to buy solar-panel production lines from the listed unit, Hanergy booked handsome profits that drove up its share price, at the same time racking up huge accounts receivable whose sustainability was questionable.
Hanergy’s share price had surged more than sevenfold in the 12 months before a sudden sell-off in May 2015, which saw its value nearly halved in just 70 minutes, before trading was halted. The company was last traded at HK$3.91 on May 21, 2015.
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