Wednesday, August 22, 2007
‘Iron princess’ set to buy – not be bought
By Robin Kwong in Hong Kong
Published: August 19 2007, FT
Diana Chen, one of China’s richest women, is not your typical iron industry baron.
Ms Chen, 36, is a Western-educated “princeling”, as the children and grandchildren of China’s communist elite are known. Her late grandfather, Lu Dong, was China’s metallurgy minister in the 1960s and 1970s.
This summer, Ms Chen launched a hostile takeover for Hong Kong-listed China Oriental Group, which controls a mid-sized steel mill in Hebei province. Her bid came after a falling out with Han Jingyuan, Oriental's chairman, who controls 45 per cent of the company.
Such manoeuvres are unusual in an industry forged by conservative central planners such as Ms Chen's grandfather. But then so is the career path of China's “iron princess”.
In the early 1990s, Ms Chen studied for an MBA degree at the New York Institute of Technology before returning to Hong Kong to start Pioneer Iron & Steel Group with her mother, who had studied metallurgy in university but was not previously involved in the industry. In little more than a decade since, Pioneer has become one of the largest private importers of iron ore into China. Last year Forbes magazine estimated Ms Chen's wealth at $216m.
“It was a matter of using non-traditional means to approach a traditional industry,” Ms Chen says. “Before, everyone just did simple trading. We used intangible assets and skills to help [state-owned companies such as Wuhan Iron and Steel Group, and Angang New Steel Company] get loans and to reform themselves to prepare for IPOs.”
Those services were provided free of charge, says Ms Chen, but they helped build relationships and gave her an in-depth knowledge of the companies. By the turn of the century, when the steel industry revived on the back of China's economic growth, Pioneer was well-positioned to bring together China's steel makers and foreign iron miners. “By 2003, we were importing about 15-20 per cent of China's iron ore,” she says.
Ms Chen admits that being the descendant of a top communist official has helped, “but only in the sense that people knew you came from a respectable family. My grandfather was never corrupt, and my mother always told me not to shame my grandfather's name . . . I had the guanxi [connections], but I never used them.”
Ms Chen says her offer to China Oriental's shareholders represents a “final effort” to revitalise the company. She claims the group, one of China's few publicly listed steel companies that is completely free of state ownership, failed to make full use of its access to modern financial markets as a Hong Kong-listed company.
Hostile takeover attempts are extremely rare in Hong Kong, where in many smaller listed companies the largest shareholder owns a controlling stake. But if she succeeds, Ms Chen says she plans to aggressively raise funds and acquire smaller rivals.
“If I fail, I will exit the company. I have other plans such as buying another mill, but I am not so silly as to give up before this one last try.”
China Oriental's board, excluding Ms Chen, has said her bid for the company was unsolicited and “did not have the support of the board”. Last week, it advised shareholders to reject the offer. Mr Han could not be reached for comment.
Ms Chen's offer price amounts to HK$3 per share, well below Friday's closing price of HK$3.59. China Oriental shares traded at HK$2.24 when the takeover was first announced in February, and Ms Chen claims the recent gains were “related to [her] offer and not sustainable”.
Ms Chen's bid has been billed as one of the first private-sector responses to Beijing's efforts to consolidate the nation's 260 iron and steel companies into larger, more competitive groups. State-controlled Wuhan Iron & Steel and Angang, among others, have already embarked on mergers and acquisition deals.
“In five years' time there will be consolidation and mega steel companies in China.” Ms Chen says.
“If you don't acquire others, you will be acquired.” ¶ 3:22 AM
Published: August 19 2007, FT
Diana Chen, one of China’s richest women, is not your typical iron industry baron.
Ms Chen, 36, is a Western-educated “princeling”, as the children and grandchildren of China’s communist elite are known. Her late grandfather, Lu Dong, was China’s metallurgy minister in the 1960s and 1970s.
This summer, Ms Chen launched a hostile takeover for Hong Kong-listed China Oriental Group, which controls a mid-sized steel mill in Hebei province. Her bid came after a falling out with Han Jingyuan, Oriental's chairman, who controls 45 per cent of the company.
Such manoeuvres are unusual in an industry forged by conservative central planners such as Ms Chen's grandfather. But then so is the career path of China's “iron princess”.
In the early 1990s, Ms Chen studied for an MBA degree at the New York Institute of Technology before returning to Hong Kong to start Pioneer Iron & Steel Group with her mother, who had studied metallurgy in university but was not previously involved in the industry. In little more than a decade since, Pioneer has become one of the largest private importers of iron ore into China. Last year Forbes magazine estimated Ms Chen's wealth at $216m.
“It was a matter of using non-traditional means to approach a traditional industry,” Ms Chen says. “Before, everyone just did simple trading. We used intangible assets and skills to help [state-owned companies such as Wuhan Iron and Steel Group, and Angang New Steel Company] get loans and to reform themselves to prepare for IPOs.”
Those services were provided free of charge, says Ms Chen, but they helped build relationships and gave her an in-depth knowledge of the companies. By the turn of the century, when the steel industry revived on the back of China's economic growth, Pioneer was well-positioned to bring together China's steel makers and foreign iron miners. “By 2003, we were importing about 15-20 per cent of China's iron ore,” she says.
Ms Chen admits that being the descendant of a top communist official has helped, “but only in the sense that people knew you came from a respectable family. My grandfather was never corrupt, and my mother always told me not to shame my grandfather's name . . . I had the guanxi [connections], but I never used them.”
Ms Chen says her offer to China Oriental's shareholders represents a “final effort” to revitalise the company. She claims the group, one of China's few publicly listed steel companies that is completely free of state ownership, failed to make full use of its access to modern financial markets as a Hong Kong-listed company.
Hostile takeover attempts are extremely rare in Hong Kong, where in many smaller listed companies the largest shareholder owns a controlling stake. But if she succeeds, Ms Chen says she plans to aggressively raise funds and acquire smaller rivals.
“If I fail, I will exit the company. I have other plans such as buying another mill, but I am not so silly as to give up before this one last try.”
China Oriental's board, excluding Ms Chen, has said her bid for the company was unsolicited and “did not have the support of the board”. Last week, it advised shareholders to reject the offer. Mr Han could not be reached for comment.
Ms Chen's offer price amounts to HK$3 per share, well below Friday's closing price of HK$3.59. China Oriental shares traded at HK$2.24 when the takeover was first announced in February, and Ms Chen claims the recent gains were “related to [her] offer and not sustainable”.
Ms Chen's bid has been billed as one of the first private-sector responses to Beijing's efforts to consolidate the nation's 260 iron and steel companies into larger, more competitive groups. State-controlled Wuhan Iron & Steel and Angang, among others, have already embarked on mergers and acquisition deals.
“In five years' time there will be consolidation and mega steel companies in China.” Ms Chen says.
“If you don't acquire others, you will be acquired.” ¶ 3:22 AM
