Bain Capital LLC converted its 1.59 billion yuan ($236 million) bondholding in Gome Electrical Appliances Holdings Ltd. into a 9.98 percent equity stake, gaining votes at a shareholders’ meeting this month.
Gome, China’s second-biggest electronics retailer, will cancel the convertible bonds and issue 1.63 billion new shares to Bain on Sept. 22 at a conversion price of HK$1.108 each, according to a Gome Hong Kong stock exchange filing yesterday.
Shareholders will vote this month at a meeting, called by Gome’s imprisoned billionaire founder Huang Guangyu, on whether the three directors representing Bain will remain. They are Jonathan Zhu, Ian Andrew Reynolds and Wang Li Hong.
Huang is seeking to regain control of the company from prison. At the Sept. 28 meeting, shareholders will also vote on removing Chairman Chen Xiao and Director Sun Yi Ding, replacing them with Huang’s sister Huang Yanhong and his lawyer Zou Xiaochun. Bain is backing Chen, Gome has said.
Two unidentified shareholders with a 31.6 percent stake in the company voted against three Bain-nominated directors at an annual shareholders meeting on May 11. Gome reappointed the three directors to avoid a penalty payment to Bain.
The private-equity firm bought its stake in China’s second-biggest electronics retailer in June 2009, while Huang was still under Chinese police investigation. Huang was sentenced by a Beijing court in May to 14 years in prison for crimes including insider trading and bribery. He has lost his appeal against the sentence, the Securities Times said last month.
Gome fell 0.4 percent to HK$2.34 in Hong Kong trading yesterday. The stock has dropped 17 percent this year, compared with a 0.7 percent decline in the benchmark Hang Seng Index.
In a separate statement yesterday, Gome said it received a letter from the lawyers of shareholder Shinning Crown Holdings Inc., owned by Huang, expressing concerns about the convertible-bond issue in 2009, and seeking 21 days notice of any future intention by the board to issue new shares under its standing authorization.
In response, Gome said the bond issue was in the best interests of the company, and that Shinning Crown’s request for advance notice was “unreasonable” and would breach Hong Kong stock-exchange disclosure rules.
Gome is suing Huang, also known as Wong Kwong Yu, for breach of trust.
The billionaire built Gome into what was China’s biggest appliance chain, amassing a fortune estimated at $6.3 billion in 2008. He is the highest-profile businessman snared by a government crackdown on corruption.