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The Chinese meat empire WH Group has lost a fifth of its value on the Hong Kong stock exchange in recent days. The cause: founder Wan Long fired his son for misconduct and his son retaliated by exposing alleged financial fraud.
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It is between the 80-year-old Wan Long, the founder and main shareholder of the Chinese listed meat company WH Group, and his 52-year-old son Wan Hongjian. The latter accuses his father of financial fraud and mismanagement. In a letter, which was copied by almost all Chinese media, his son says that Wan Long has not declared 200 million dollars in income to the tax authorities. The company denies. “The allegations are false and misleading,” he said.
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The feud, which threatens to move to court, is bleeding the share of the world’s largest pork processor. The group, which is listed in Hong Kong, lost 17 percent on Wednesday and Thursday, a loss of approximately 1.85 billion euros. WH is still worth 86.4 billion Hong Kong dollars or 9.5 billion euros. The subsidiary group Henan Shuanghui Investment & Development also lost ground on the Shenzhen stock exchange.
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In June, father Wan Long knocked his son off the board. As is often the case in family businesses, father and son have a different vision of what the succession at the top should look like.
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Wan Hongjian’s accusation does not come out of the blue. As is often the case in family businesses, father and son have a different vision of what the succession at the top should look like. In June, Wan Long, whose fortune Forbes estimates at $1.5 billion, kicked his son off the board of directors, where he was vice president. The company reported misconduct, alleging that Hongjian “behaved aggressively towards company property.” As a director, he would ‘not have the required skills and diligence’.
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To top it off, the paterfamilias announced last week that he was stepping down as CEO and that his financial director Guo Lijun would succeed him. Wan Hongjian apparently had a hard time accepting that. In his letter, he expressed doubts about the commercial and management capabilities of the new CEO. Wan Long, however, reaffirmed his confidence in his successor, and would assist him in the first months. Spicy detail: Wan Long crowned his youngest son Wan Hongwei vice chairman of the board.
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The 107,000-employee group, which generated sales of USD 25.5 billion last year (+6%), has a long tradition of renewing management from within its own ranks. The children also have to go through the ranks first. For example, Wan Hongjian started out as a worker in the cooked food factory of the subsidiary Luohe Meat Products.
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WH Group
- Founded by now 80-year-old Wan Long.
- Headquarters in Hong Kong.
- Turnover: $25.6 billion.
- Operating profit: $1.7 billion.
- Employees: 107,000.
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world news
Quite a few analysts, including from Citigroup, argue that the markets are overreacting to the family quarrel. They focus on a planned capital reduction – the company wants to buy back its own shares for 1.9 billion dollars – and the positive expectations about the meat market in the second half of the year. The stock recovered slightly on Friday.
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