Related posts: Fosun’s (656 HK) Folli Follie and the receivables question; receivables were worth 280 days worth of sales at the Hong Kong subsidiary. Add in “advances to suppliers” of $82m and “other receivables” of $39m and the total hit 400 days worth of sales; Focus Media’s Backdoor China Listing Hits Snag; Shell company Jiangsu Hongda New Material being probed by regulators
August 12, 2015 11:36 am
China’s Fosun linked to anti-corruption probe
Patti Waldmeir in Shanghai
Fosun, one of China’s most internationally acquisitive companies, is defending itself against allegations that it sold property cheaply to an executive of a state-owned company who was on Tuesday jailed for corruption. A report in the official Xinhua news agency linked Fosun and its chairman Guo Guangchang, one of Shanghai’s most powerful businessmen, to another corporate leader, Wang Zongnan, the former head of state-owned Bright Food Group who was sentenced to 18 years in jail for embezzlement and bribery.The court proceedings, published in Xinhua, said that “after the establishment of a joint venture between Fosun and Shanghai Friendship Group” — a state-owned company of which Wang was then general manager — “Wang took advantage of his position and delivered benefits to Fosun”. Xinhua also said that Wang approached Mr Guo for his help in purchasing property for Wang’s parents in 2003.
Two villas developed by Fosun’s property arm were then sold to Wang’s parents for Rmb2.1m ($330,000), some Rmb2.7m less than the properties’ market value at that time. Fosun said the figures were “revealed in the court’s judgment”. The two villas were resold in 2010 and 2013 for a total of Rmb14.8m, Xinhua said.
Fosun, which this year bought French tourism group Club Méditerranée and Canada’s Cirque du Soleil (with private equity group TPG Capital), denied the allegations. “Fosun has neither gained inappropriate benefit from the co-operation with Shanghai Friendship Group, nor received benefits from Wang Zongnan,” Fosun said in a statement.
Fosun went on to defend the housing transactions: “Wang Zongnan’s house purchase was completed in 2003. We believe the selling prices of the subject properties were within the reasonable discount range offered by developers in the extreme economic downturn environment at that time.”
Wang was sentenced to 18 years imprisonment on Tuesday for embezzling Rmb195m when he worked for a unit of a local supermarket chain from 2001 to 2006. Wang illegally earned Rmb1.2m, Xinhua said.
The Xinhua report brings unwelcome attention to Mr Guo, who models himself on Warren Buffett. He has engaged in a flurry of overseas deals in recent years as part of an aggressive international expansion strategy that has included insurance companies, overseas property and tourism assets.
China has put a number of senior government officials and executives of state-owned enterprises on trial as part of Beijing’s anti-corruption campaign.
Shares in Fosun International, the group’s Hong Kong-listed unit, fell 2 per cent to close in Hong Kong on Wednesday at HK$15.06.