On June 27, 2012, China Petrochemical Development Corporation (“CPDC”) will hold its Annual General Meeting. The most critical ballot item for this year’s meeting is the election of directors, including two independent directors. Because of the LeaLea Enteprise Co., Ltd. (“LeaLea”) has recently disseminated false accusations to defame CPDC’s board and management team. The chairman & CEO, Sheen, Ching-Jing thereby sent a letter to CPDC’s shareholds to clarify some of the issues raised in these materials.
CPDC was state-owned enterprise originally, then listed in the stock market and privately operated according to the Statute of Privatization of Government-Owned Enterprises since 1994. The current management team, Core Pacific Group, has consistently created shareholder value since then.
CPDC is one of a few companies in Taiwan run by professional managers. Unlike many other Taiwanese enterprises, such as LeaLea Group, which are still family-owned, its ownership is clear and simple and hence it does not have the attending obstructions in financial capital. CPDC are transparent and pursue a single goal: maximizing value for its shareholder.
Mr Sheen, Ching-Jing emphasizes that CPDC under his team’s leadership was still able to achieve record performance last year, regardless of the difficulties presented by the extremely adverse global economic conditions. Altogether, CPDC’s team consisting of professional experts to grow CPDC and commit to grow with shareholders with the ultimate goal of maximizing shareholder value.
Mr Sheen’s Letter to shareholders is as following:
Dear Shareholders,
As we approach our 2012 Annual General Meeting (AGM), we recently learned that certain materials containing distorted, untruthful and potentially libelous criticisms have been disseminated by a group of dissident investors, which includes LeaLea Group, its affiliates and a consulting firm led by Alex Lee. Their actions have already greatly damaged CPDC’s reputation and shareholder value, and they fly in the face of CPDC’s core values. I would like to take this opportunity to clarify some of the issues raised in these materials.
CPDC’s current management team has consistently created shareholder value.
CPDC is one of a few companies in Taiwan run by professional managers. Unlike many other Taiwanese enterprises, such as LeaLea Group, which are still family-owned, our ownership is clear and simple and hence we do not have the attending obstructions in financial capital. We are transparent and pursue a single goal: maximizing value for our shareholders.
Although our board experienced a small degree of turnover last year (our former CEO Mr. Heng Feng resigned due to personal health concerns, now still is our subsidiary company’s chairman), CPDC continued to receive profound support from our foreign institutional (FINI) investors. Normally, a CEO’s resignation without cause results in a reduction of institutional shareholders’ holdings and thus causes downward pressure on the stock price. In contrast, our FINI investors not only did not reduce their interests, but also slightly increased their positions in July 2011 (see table below). In addition, our stock price reached a record high since 2005 at the time when the board was first under its current leadership.
This history strongly demonstrates the confidence of our FINI investors in both our BOD and management team.
Furthermore, CPDC under my team’s leadership was still able to achieve record performance last year, regardless of the difficulties presented by the extremely adverse global economic conditions. Altogether, we are truly a team consisting of professional experts to grow CPDC and commit to grow with our shareholders with the ultimate goal of maximizing shareholder value.
On the contrary, the dissidents have continued to buy and sell CPDC’s stock to pursue their personal financial interests, with complete disregard for the interests of CPDC’s other shareholders. They have even reduced their holdings since the AGM record date. For instance, one of the dissidents, Mr. Yan Shian Lu (盧燕賢), who is the largest individual shareholder of CPDC and has allied with LeaLea Group to pursue CPDC’s board seats, began to accumulate CPDC’s stock in March of 2010 when our stock was being traded in the low teens. He continued to accumulate shares of CPDC until our price reached the low ＄40s, at which point he began to sell his holdings. At one point, Mr. Lu and his affiliate’s aggregate holdings accounted for about 27.61% of CPDC’s outstanding shares. Such a round trip trading has brought him huge profits. The timing of Mr. Lu’s actions has been perfectly coincident with LeaLea Group’s contract breach detailed in next section.
As of record date, Mr. Lu held 17.23% of CPDC shares; he has continued to decrease his holdings to 12.83% as of June 6, 2012 (presumably after securing his voting rights), and according to recent records, his selloff continues.
This liquidation strongly demonstrates that Mr. Lu’s intentions are merely to pursue his own short-term personal financial interests, without any commitments to CPDC’s other shareholders. Nothing about his actions would suggest that he is a long term investor in our company’s stock. Does this sound to you like a shareholder who deserves to be represented on your company’s Board of Directors? I think not.
LeaLea Group, led by Mr. Shau Yi Guo (郭紹儀), has miserable records in its corporate governance practices – it has been charged and fined by the Financial Supervisory Commission several times.
To summarize LeaLea’s numerous corporate governance violations, I have summarized the records published by Financial Supervisory Commission Exchange Yuan and Taiwan Stock Exchange:
Year Violation Records of Regulations - LeaLea Group and its Subsidiary Li Peng Enterprise (1447) Consequences
2010 Article 157 of Securities and Exchanges Act - short-term traded its own stocks Fined with NT＄42.64 millionEnforcement of Returning Rights
Mar 2011 Article 43-1 of Securities and Exchange Act – failed to report the acquisition of LeaLea shares Enforced by Securities and Futures Bureau
July – Sept. 2010 Violation of its own Articles of Incorporation – Acquired CPDC’s shares over the limits approved by BOD Fined NT＄240,000 by Taiwan Stock Exchange
These records clearly showed that LeaLea Group has repeatedly violated stock trading regulations. Given the fact that LeaLea Group has a complicated shareholder structure and its subsidiaries cross-hold each other’s shares intensively, these records initiate tremendous concerns regarding how LeaLea can assure CPDC’s shareholders that it is accountable for its actions. Along the same lines, this also makes us worry about the potential risks of insider trading and related party transactions. In contrast, CPDC has recently strengthened our own internal controls through the launch of the Code of Ethics and the Management Integrity Code.
In addition to violating government regulations, LeaLea’s corporate governance practices are extremely weak and far below best practice standards. With such a record, we are absolutely not convinced that LeaLea’s current campaign has anything to do with improving CPDC’s corporate governance practices. Below are a few key points highlighted in China Times Weekly on Friday 5/11/2012.
LeaLea Group engaged with its subsidiaries in numerous related party financial transactions. For example, LeaLea funded Li Peng Enterprise’s acquisition of CPDC stock; Li Peng Enterprise is suspected of related party transactions, as it is one of CPDC’s downstream clients.
Although claiming the acquisition of CPDC’s stocks is for long-term investment, LeaLea’s financial report categorized the investment as short term.
LeaLea’s own Board of Directors contains no independent directors.
Among LeaLea’s five directors, some of them are third-degree relatives of the CEO and one of two supervisors is CEO’s direct family.
All shares allocated for LeaLea Group’s 2011 Employee Purchase Plan (targeted to provide broad-based employee incentives) were purchased by Mr. Guo.
LeaLea Group’s conspiracy to erode CPDC’s stock price.
In November 2011, Li Peng Enterprise, we suspect, intentionally violated the purchase agreement contract and resisted to purchase raw materials with agreed amount of 7,500 tons from CPDC. Instead, it only purchased 1,598 tons. Such a contract breach resulted in significant damage to CPDC’s stock price. We instantly raised great concerns to our regulation agencies as well as our shareholders regarding LeaLea Group’s conspiracy. It intentionally concealed its contradictory related party role in order to press down our stock price and disregarded our shareholders’ best interests to achieve its dirty goals – controlling our board. LeaLea’s intention is simple: to control the resources and edge out the other three of CPDC’s downstream customers – LeaLea Group’s competitors – by providing less raw material or increasing the purchase price after securing seats on our board. Those three downstream customers are very concerned about LeaLea Group’s aggressive hostility. They worry that their confidential business information may be revealed if LeaLea Group controls CPDC’s board and have threatened to terminate their business relationships with CPDC.
Broadening our customer base in order to diversify business risks and growing with our customers to sustain long term relationships with them have always been among CPDC’s core values. However, LeaLea Group is just not the candidate we would like to invite to join us in this endeavor. Their poor performance record and role as a related party will not only increase our business risks but will also be damaging to shareholder value. We can hardly imagine the consequences of having them on the board – increasing risks in insider trading, substantial
setbacks in corporate governance enhancements by engaging with related parties to the board, risks of losing clients and unsettled morale of CPDC employees. Thus, to protect our shareholders’ best interests we have also filed litigation regarding LeaLea Group’s violation of Article 19 of the Fair Trade Act and we sincerely hope our government agency can stop this dissident’s greed to pursue their own interests by sacrificing our shareholders’ value.
CPDC has consistently and substantially outperformed LeaLea.
Comparing LeaLea’s EPS between 2009 and 2011 of NT＄0.92, NT＄2.11, NT＄0.88 respectively, CPDC’s NT＄1.15, NT＄3.52 and NT＄5.53 easily outperformed LeaLea Group’s mediocre records (see chart below).
As the chart makes clear, CPDC’s performance has increased dramatically over the last three years, while LeaLea’s performance has been mediocre at best. How could LeaLea’s management team have a better business plan for CPDC when it is quite obviously doing such a poor job of tending its own garden?
With LeaLea Group’s poor performance with respect to both corporate governance and finance, I am confident that this letter can provide a clear and comprehensive insight regarding CPDC’s current management team. Based on our performance record, future business plan, and my personal dedication to continue to invest in CPDC without liquidating my shares, I cordially urge you to vote AGAINST their nominees and vote FOR our nominees.
Should you have any questions about the foregoing or CPDC itself, please do not hesitate to contact us.
Business Manager:
Mr. Ke-Shuan Wang, President +886-2-87878473
edkswang@cpdc.com.tw
Chief Financial Officer:
Mr. Jan-Song Yu, Vice President +886-2-87878370
jansonyu@cpdc.com.tw
Deputy General Manager, Shareholder Services:
Mr. Tien-Hsun Huang, Associate +886-2-87871194
tienhsun.huang@cpdc.com.tw
Spokesman:
Mr. Ching-Shien Yang, Vice President +886-2-87878460
csyang@cpdc.com.tw
Very sincerely yours,
Sheen, Ching-Jing沈慶京
Chairman & CEO of CPDC
轉載自～ 台灣醒報網頁設計鳳梨酥個人信貸關鍵字行銷高雄幼稚園
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