Sanlian Commercial Company announced Tuesday evening that it has filed a lawsuit against Gome, China's biggest electronics retailer, in Shangdong Supreme Court, demanding the cancellation of a share auction through which Gome acquired 19.7 percent of Sanlian stocks.
On January 7, 2008, the Jinan branch of China CITIC Bank in the capital of Shandong Province applied to auction 27 million Sanlian shares, which the bank was holding as security, in order to clear unpaid Sanlian debts. On February 14 2008, Gome acquired the shares for 540 million yuan through a third company, Shandong Longjidao Construction Company.
At the end of last July in another auction, Gome snapped up a further 22.76 million shares for 135 million yuan through its partner, Beijing Zhansheng Investment Company, to become the controlling stockholder of Sanlian with a 19.7 percent stake.
In the lawsuit, Sanlian charged Gome with unfair competition, as well as a hostile and illegal takeover, all in violation of auction law, securities law, and Mergers & Acquisitions law.
"Gome colluded with the bank and other companies in the auctions," said an insider. "One auction was arranged during last year's Spring Festival. Such an inconvenient time left rival bidders without sufficient time to prepare their bids, and therefore discouraged them from taking part in the auction."
It is understood that the court will hear the case on February 18.
Since Gome's acquisition of Sanlian's shares last August, Gome has not yet made any changes to Sanlian's board.
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(China.org.cn by He Shan, January 14, 2009)