Nam Tai Inno Park in Shenzhen is the developer’s biggest asset
A battle for control of a New York stock exchange-listed mainland developer entered its latest chapter this week when Nam Tai Property announced a new chairman, CEO and CFO.
The leadership change by the Shenzhen-based developer came after Kwok Ying Chi, the younger brother of Kaisa Group Holdings chairman Kwok Ying-shing, abruptly stepped down from his chairman and CEO roles in the face of criticism by activist shareholders after the company’s stock lost as much as 70 percent of its value in the last two years.
The new slate of directors, all of whom have had long term relationships with Kaisa Group before being appointed by Nam Tai’s board, are already being attacked by fund manager IsZo Capital. The activist firm continues to call for a shareholder meeting to vote on an alternative board slate that it has proposed.
“Shareholders should be outraged that Nam Tai has exacerbated its dismal corporate governance and laid the groundwork for more conflicts of interest by appointing three Kaisa-affiliated individuals,” said IsZo founder and managing partner Brian Sheehy in a statement.
Board Battle Continues
Shareholders in Nam Tai, which has a market capitalisation of $403 million, reacted to the new leadership with a shrug on Monday, with shares closing the day of the announcement at $9.85 – up just 0.3 percent from the opening price of $9.83. With IsZo denouncing the new board on Tuesday, shares have since climbed to $10.40 each at the time of publication.
Kwok Ying-chi (left), with Kwok Ying-shing (centre)
Kwok Ying-chi had stepped down with immediate effect on 14 September, citing personal reasons, after first taking the helm at the company in January 2018.
The Shenzhen-based businessman quit Nam Tai’s board entirely just three days after IsZo declared that it had recently delivered to Nam Tai verified requests from holders of more than 40 percent of the Company’s outstanding shares to convene a special meeting to vote on a new board. The company’s by-laws are said by IsZo to require support from 30 percent of shareholders to call a meeting.
IsZo, which holds around 10 percent of Nam Tai’s stock, had recommended, and continues to push for, its own set of directors, saying, “Our slate has a credible, value-enhancing strategy for improving corporate governance, installing a proven local management team, maintaining a disciplined capital allocation approach and focusing on existing projects.”
Bringing in Kaisa Loyalists
Nam Tai’s board appointed Dr Lai Ling Tam as executive chairman, and the company’s current general manager of China operations, Jiabiao Wang was named CEO. As part of the same Monday announcement Yu Zhang was replaced as CFO by David Wai Hang Wan.
Dr Lai, like Kwok Ying-chi, is a former vice chairman of Kaisa Group with Lai having served as a director of the top 20 mainland developer since the time of its 2009 IPO on the Hong Kong exchange. Jiabiao Wang is a former Kaisa Group president.
“I look forward to working with the Board, Mr. Wang and the rest of the management team, as well as the Company’s various stakeholders, including its shareholders, to achieve Nam Tai’s full potential and create sustainable value for shareholders,” Dr Tam said in a statement.
US Billionaire Holds Decisive Stake
Nam Tai’s potential primarily lies in a portfolio of properties in Shenzhen and Wuxi, China, including the 103,739 Nam Tai Inno Park business park development in the southern city’s Guangming district. In all, the company has a portfolio of 208,802 square metres of projects, according to its 2019 annual report, with over 161,123 of that in Shenzhen.
Kaisa Group remains the company’s largest shareholder with a direct stake of 23.7 percent at the end of 2019. US billionaire Peter R Kellogg and his family control just over 19 percent of Nam Tai shares as of this month, but have not commented publicly on the leadership struggle.
IsZo alleges that since Kaisa took control of Nam Tai’s board in late 2017 and named Kwok Ying-chi as chairman in 2018, it has signed service agreements for Kaisa to manage Nam Tai Properties and had earlier this year purchased a Dongguan site at a price equal to more than half of the developer’s market value.
Shares in Nam Tai were trading at $13.00 in January 2018 when Kwok Ying-chi took the helm and slid by as much as 70 percent before the leadership struggle began last year. The fight for the developer has seemed to ignite hopes of a buyout attempt, with shares rebounding to around 70 percent of their 2017 value.
Kaisa Pushes Forward
Shenzhen-based Kaisa gained global attention in 2014 and 2015 when it defaulted on a series of debt obligations after Kwok Ying-shing was detained in relation to a land sale scandal and the government froze its project sales.
While the company’s bond investors suffered a close haircut, the developer has been expanding aggressively in recent years, including buying a number of sites in Hong Kong during 2020.
The developer’s struggle to control Nam Tai looks set to continue with IsZo’s Sheehy declaring on Tuesday that, “We believe the case for installing our director candidates and positioning them to implement their value-enhancing strategic vision – which can help unlock Nam Tai’s intrinsic value – grows stronger by the day.”
There has yet to be any announcement by Nam Tai regarding a special meeting, and the company has still to respond to IsZo’s latest calls for a replacement board.
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