Kondarl boss Luo Aihua has been detained
Three officers of developer Shenzhen Kondarl Group have been detained by Shenzhen police within the last week, according to announcements by the Shenzhen-listed real estate firm, following a five year conflict between the company’s founder and its second-largest shareholder, Kingkey Group, one of the largest industrial conglomerates in the southern China megalopolis.
Kondarl chairwoman Luo Aihua, along with two other directors of the company, were detained on charges of misusing company funds, and removed from the company board on the same day. Luo’s status was announced to the exchange on August 13th, with the announcement on the other two directors coming on August 15th. In its statements to the exchange, Kondarl indicated that the police have not yet finalized the case and that no trial has been set so far.
The set of arrests appears to bring an end to a battle between Kondarl founder Luo Aihua and Kingkey Group for control of the RMB 9 billion property firm.
Questions Raised Over Bao’An Project
As the Shenzhen police have not yet released details regarding the charges against Luo Aihu and her fellow directors, the nature of their alleged misuse of company funds remains unclear, however, local media accounts point to accusations made by Kingkey representatives at earlier Kondarl shareholder meetings as providing potential clues.
At Kondarl’s 2015 annual general meeting, Luo Aihua was questioned by a lawyer representing Kingkey Group over development costs for the second, third, and fourth phases of the company’s Shanhai City Project in Shenzhen’s suburban Bao’an District, according to an account on local website Jianwen.
The Kingkey representative question the RMB 11,000 ($1593) per square metre development cost for the project, declaring them to be far above the average market price of RMB 2000 to RMB 5000 per square metre.
However, Luo Aihua responded at the time that the higher costs were due to the project selling fully decorated homes rather than bare shells and denied accusations of misuse of funds while saying that all details of the project costs had been disclosed.
Kingkey in Control
Following the arrest of Lu Aihua and her fellow directors, former Kingkey executive Xiong Wei was appointed as Kondarl’s new chairman on August 13th, with Kingkey’s officials Ba Geng, Cai Xinping, and Huang Wuyi being appointed as Kondarl’s new CEO, Deputy CEO, and CFO respectively at the same board meeting.
That takeover brought an end to Luo Aihua’s control of the company some fifteen years after she had founded it as a chicken raising concern. Now Kondarl’s business includes animal feed production and sales, as well as chicken breeding and real estate development, a combination that helped it to earn revenues of RMB 1.81 billion ($263 million) in 2017.
Kingkey operates as a real estate developer in Shenzhen, where it is best-known for having developed the 442-metre-tall Kingkey 100 tower (also known as the KK100), and is the major developer of the city’s Caiwuwei area.
Arrests Follow Report of Hostile Takeover by Kingkey
According to Kondarl’s 2017 third quarter report, Kingkey Group, held 31.55 percent of Kondarl ’s shares, making it the second-largest shareholder after Luo Aihua’s Huachao Investment Company, which held 31.65 percent.
Kondarl has reported to the Shenzhen Stock Exchange that Kingkey was attempting a hostile takeover of the smaller developer and attempted to block Kingkey’s representatives from the company board.
On August 3rd, Kingkey initiated a tender offer for Kondarl which would have boosted Kingkey’s holdings in the company to 41.65 percent and made it the largest and controlling shareholder in the company, according to a report in Caixin.
Shareholder Dispute Leads to Warning From the Exchange
The charges this month against Luo Aihua and her fellow directors of Kondarl come after the company was given a warning of a potential delisting by the Shenzhen Exchange, after its dispute with Kingkey led to it failing to submit its 2017 annual report by the required deadline.
Kondarl ’s board of directors, previously controlled by Luo Aihua and Huachao Investment, had proposed to hire Ruihua Accountants as the company’s auditors, only to have their proposal blocked by directors representing Kingkey Group at shareholder meetings in February and April.
After rounds of negotiation, the company finally picked Shinewing Accounting as its auditors on August 10th, just 22 days before the deadline for delisting.
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