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Samuel Yeung

Minority H-share holders in Angang New Steel have blocked a management plan to buy assets from its parent, reflecting a small but growing trend of activist shareholders blocking such transactions.

The Anshan City-based firm in Liaoning province had proposed paying 351.29 million yuan (about HK$329.22 million) to buy plant and machinery from its parent but was voted down by 92.49 per cent of minority shareholders in Wednesday's mainland ballot.

The company did not specify the types of shares involved in the vote but the company is 30 per cent held by Hong Kong-listed H-share holders and 25 per cent by domestic A-share investors.

A source close to the transaction said that almost no A shareholders voted and the deal was ironically blocked as a result of investor apathy since only 13 per cent of registered H-share holders participated in the ballot.

'Because so many shareholders gave up their votes, it gave the [opposition] shareholders a disproportionately large say in the transaction,' the source said.

The firm's state-owned parent, Angang Holding, holds a 44.56 per cent stake in the listed firm but, under listing rules, is barred from voting in 'connected transactions' to which it is a party.

Under the $351.29 million transaction, Angang New Steel proposed buying steel production-related assets including land, buildings and machinery from its parent at a 2.38 per cent premium to an independent valuation report.

Kenny Tang Sing-hing, associate director of SAR-based Tung Tai Securities, said the case set a good example to mainland investors of the benefits in shareholder activism.

Mainland cases of organised minority shareholder opposition to transactions are rare, generally allowing controlling shareholders an easy ride when pushing through connected transactions of dubious value.

A Chinese Securities Regulatory Commission (CSRC) study early this year showed that major shareholders on average control 44.6 per cent of mainland-listed firms. Among 1,175 firms listed in the Shanghai and Shenzhen stock exchanges by April, 936, or 79 per cent had connected transactions with their biggest shareholders.

Jesse Wang Jianxi, assistant chairman to the CSRC, said in Hong Kong on Wednesday that controlling shareholders often treated minority owners as 'automatic teller machines' when conducting connected transactions.

The CSRC is considering a requirement that mainland listed firms hire an auditor, other than its annual report auditor, to offer a second opinion in the case of such deals.



Activists block Angang proposal to buy assets from parent