Business Intelligence on Retailing, Franchising, and Consumerism in China

Sanlian Group Sues Gome For Illegal Share Deals

Sanlian Commerce has announced that the Shandong-based Sanlian Group has sued several companies, including the Chinese electronics retail giant Gome, for the illegal acquisition of 27 million share in Sanlian Commerce owned by Sanlian Group and has asked the court to announce the bid as invalid, as well as seeking CNY50 million compensation from these companies.

The case has been accepted by the Shandong Supreme People's Court and will be heard on February 18, 2009.

On January 7, 2008, China's CITIC Bank Jinan branch applied to sell the 27 million shares in Sanlian Commerce owned by Sanlian Group by auction to pay off CNY39 million in outstanding bank loans. On February 14, 2008, the Intermediate People's Court of Jinan designated Shandong Qilu Ruifeng Auction Company to be in charge of an open auction and the 27 million shares, which accounted for 10.69% of the total equity of Sanlian Commerce, were acquired by Shandong Longjidao Construction Company for CNY541 million. On February 20, 2008, Sanlian Commerce received an ownership transfer decision from the Intermediate People's Court of Jinan, according to which, Longjidao become the largest shareholder of Sanlian Commerce.

Soon after this the Chinese electronics retailer Gome formally acquired Longjidao and indirectly held Sanlian Commerce.

Sanlian Group says the auction has many suspicious features. Therefore, the company is suing all the companies involved: including Gome Electrical Appliance, Gome Jinan branch, Longjidao, Shandong Yongdao Investment Company, CITIC Bank Jinan branch, and Shandong Qilu Ruifeng Auction Company, in the Shandong Supreme People's Court. Sanlian is asking the court to declare the auction to be invalid and order CNY50 million in compensation from the defendants. In addition, Sanlian Group says it will maintain the right to seek further compensation.

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