Signs of peace at Gome after supply agreement inked

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Gome Electrical Appliances Holdings Ltd has renewed its purchase-and-supply agreement with Beijing Gome, which is privately owned by jailed company founder Huang Guangyu, in a move that may help to end a long-running boardroom struggle.

The agreement, under which the two parties agreed to supply products at each other's request from time to time on an at-cost basis, will be extended to the end of 2012 from Dec 31, 2010, the company said in a statement to the Hong Kong Stock Exchange.

The two sides also increased the annual transaction cap (excluding value-added tax) to 800 million yuan ($121 million) for 2011 and 1 billion yuan for 2012, according to the statement.

The transaction cap was 600 million yuan in 2010.

By the end of the first half of 2010, the listed company owned 740 stores, with sales revenue of 24.9 billion yuan.

Meanwhile, Beijing Gome, owned by Huang, which has some 370 stores, generated 9.62 billion yuan in sales during the same period, according to Gome's interim financial report.

Gome declined to comment on the issue, while Huang's spokesman was not available for comment at the time of going to press.

This contract extension came after Gome's shareholders approved the appointment of Huang's two representatives to the company's board in mid-December, 2010. That agreement may signal the possible end of a power struggle between the existing management and the founder.

Shareholders agreed that Zou Xiaochun, Huang's corporate lawyer, should join Gome's board as an executive director with immediate effect and Huang Yanhong, Huang's sister, will join as a non-executive director, said the company.

Huang Guangyu, who is serving a 14-year jail sentence for bribery and insider trading, is currently Gome's largest shareholder with a 32.47 percent stake.

In September, the company's shareholders rejected an attempt by Huang to replace the chairman, Chen Xiao, with Huang Yanhong.

Investors became concerned in the aftermath of the September vote after Huang threatened to cut ties between his 370 privately owned stores and the listed company.

In the first three quarters of 2010, Gome's revenue increased 18.6 percent year-on-year to 37.27 billion yuan while net profit rose 49 percent to 1.44 billion yuan from a year earlier.

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