Missing CEO

A Chinese Riddle

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AWOL CEO. Guo Guangchang, the founder of Chinese investment group Fosun, disappeared last week in a possible government anti-corruption sweep. The development has unsettled Germany's banking sector, where Fosun is bidding for private bank Hauck & Aufhäuser.
  • Why it matters

    Why it matters

    The disappearance of Chinese billionaire and Fosun CEO Guo Guangchang could upend his company’s bid to acquire German private bank Hauck & Aufhäuser.

  • Facts

    Facts

    • Chinese police reportedly detained Guo Gaungchang on Thursday, but it’s unclear whether he’s being held as a suspect or a witness.
    • Mr. Guo currently ranks 11th on the Forbes list of the richest people in China, with a net worth of $6.3 billion.
    • In 2015, Fosun announced 16 takeovers worth a combined $4.5 billion.
  • Audio

    Audio

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Guo Guangchang, the chief executive of Fosun and one of China’s wealthiest men, has disappeared.

Many fear he has been caught up in China’s anti-corruption dragnet. Now Germany’s banking sector is waiting with baited breath to see what this means for Fosun’s takeover bids for two German banks.

Guo Guangchang is a star – and something of an oddity on China’s finance scene.

From a poor background, he managed to get into Fudan University, an elite school, where he studied philosophy. He then used money he had saved up to study abroad to start a company instead, Fosun.

Today Fosun is one of China’s biggest private companies and the 48-year-old billionaire is expanding his empire worldwide, one hostile takeover at a time.

But now the wiry man with the gap-tooth smile has disappeared. Reliable information is scarce, but there is evidence suggesting that Mr. Guo has fallen into a web of corruption investigations that are shaking China’s business world.

The shockwaves have spread as far as Germany, where Mr. Guo has a share in fashion brand Tom Tailor, and where his company is on the verge of swallowing private bank Hauck & Aufhäuser.

According to Chinese business magazine Caixin, the mystery began with a media report that Fosun had lost contact with its chairman.

The wiry man with the gap-tooth smile, one of China's most successful capitalists, has disappeared. Reliable information is scarce, but there is evidence suggesting Mr. Guo has been caught up in the corruption investigations that are shaking China's business world.

The Fosun group said in a statement: “The company understands that Mr. Guo is currently assisting in certain investigations carried out by mainland judiciary authorities.”

Police reportedly apprehended Mr. Guo at the airport in Shanghai on Thursday and he has not been heard from since.

In a teleconference on Sunday, Wang Qunbin, the president of Mr. Guo’s company, said the investigation revolved largely around Mr. Guo’s personal affairs.

On Friday, Fosun was saying that Mr Guo would be able to participate in important business decisions through “appropriate channels.”

Fosun’s Stakes-01

Shares in Fosun Group were suspended on Friday. The group announced that on Monday it was to be business as usual once more.

But the damage had already been done.

In New York, U.S.-traded shares of Fosun International shed 11 percent before trading was suspended. The value of the company’s bonds also collapsed.

For Hu Xingdou, an economics professor at Beijing Institute of Technology, Mr Guo’s disappearance is part of a power struggle between business interests and political leaders in China.

“Quite a few of China’s mega-rich are already in prison, or on the way there,” Professor Hu said. “These investigations are really shaking up the entrepreneurial world.”

Mr. Guo is not the only member of China’s elite who has temporarily disappeared.

For Hu Xingdou, an economics professor at Beijing Institute of Technology, Mr Guo's disappearance is part of a power struggle between business interests and political leaders in China.

In the course of the year, several business leaders have vanished, only to resurface. When the chief executive of Hanenergy, an energy company, didn’t show up at its annual shareholders meeting in May, its shares fell by almost 50 percent in Shanghai.

Usually in these situations, rumors circulate that corporate bosses are under the sights of government anti-corruption investigators.

Since Chinese President Xi Jinping launched his campaign against corruption, the highest anti-corruption official, Wang Qishang has become one of the most powerful people in China.

His disciplinary commission has almost unlimited powers and can arrest people without warrant. The commission operates largely outside of the Chinese state justice system.

Mr. Wang justifies his special status by saying that all measures have to be taken in the state’s fight against corruption.

There had been persistent corruption rumors about Mr. Guo, but he had always strenuously denied the allegations. Professor Hu said there may be other reasons for Mr. Guo’s disappearance.

“It’s possible he got in with the wrong crowd,” Professor Hu said, “or he’s involved in some really big deal.”

Fosun’s hunger for takeovers has made Mr. Guo’s disappearance a subject of conjecture around the world.

The Chinese company has a stake in tourism operators Club Med (which it snapped up earlier this year) and Thomas Cook, in the bank skyscraper 1 Chase Manhattan Plaza in New York City, and in the Portuguese insurer Caixa Seguros.

In 2015 alone, Fosun announced 16 takeover deals worth $4.5 billion.

But the company’s takeovers in banking are proving most controversial.

A fight has been building between Fosun and Frankfurt-based BHF Bank — in which Fosun already owns a 20 percent stake — since July. BHF Bank’s supervisory board unexpectedly forced Chief Executive Björn Robens to leave, without consulting Fosun.

Mr. Robens was considered a close confidante of Mr. Guo.

But the chairman of BHF Kleinwort Benson, Leonhard Fischer, reportedly accused him of being high-handed, having an autocratic leadership style and authorizing a set of loan guarantees on behalf of Mr. Guo and other investors without board approval.

A month and a half ago, BHF’s non-executive supervisory board launched a special investigation into Mr. Robens.

The investigation by law firm Freshfields Bruckhaus Deringer was supposed to determine whether the former chief executive had breached his fiduciary duties.

One accusation was that Mr. Robens, unbeknownst to the executive board or the supervisory board, wrote a letter on private letterhead to a group of investors, including Fosun, pledging BHF Bank guarantees of several millions euros for their plan to purchase Munich fashion brand Bogner.

Mr. Guo made no secret of his displeasure over Mr. Roben’s dismissal and made it clear he considered it a flagrant mistake. Mr. Guo then presented a takeover bid for Hauck & Aufhäuser.

Coincidentally, on the day Mr. Guo disappeared, it was announced that Germany’s Federal Financial Supervisory Board and the European Central Bank had approved Fosun’s takeover bid.

However, Fosun’s offer is significantly lower than a counter-offer from French financial institution. Oddo.

Fosun says more than 80 percent of Hauck & Aufhäuser’s shareholders have accepted its offer, but the approval of German financial supervisors and the ECB is still pending.

Banking sector analysts believe that the overseer will have to take into account the latest developments in deciding whether Fosun is a suitable owner.

 

Stephan Scheuer is Handelsblatt’s China correspondent, based in Beijing. Michael Maisch is the deputy chief of Handelsblatt’s finance desk in Frankfurt am Main. To contact the authors: maisch@handelsblatt.com and scheuer@handelsblatt.com

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