Trouble at China's NVC

EXCLUSIVE--Must credit EdisonReport---

NVC Lighting, China’s largest lighting manufacturer, has been paralyzed due to infighting and  expects its first-half net profit to decrease significantly from a year earlier.  The conflict is rooted in the resignation--or removal--of the founder and former Chairman, Wu Changjiang, who left the company earlier this summer under a cloud of suspicion.

EdisonReport has learned that Mr. Wu departed the company—and the country—when he was wanted for questioning in an investigation.   While EdisonReport does not know the reason Chinese authorities wanted to speak with Mr. Wu, we do know the inquiry coincided with the investigation of fallen Communist Party star Bo Xilai, and his wife Gu Kailai who recently admitted to murdering Neil Heywood, a UK businessman.   Turns out that officials only wanted to question Mr Wu as a potential witness and he was not the target of any investigation. NVC is based in Chongqing and does considerable business with the government.   Mr. Bo was the former party chief of Chongqing and is believed to be under investigation for corruption.

Mr. Wu returned to China and has been working hard to regain his Chairmanship position at NVC, of which he owns 19% and is still the largest shareholder.  SAIF Partners invested $22 million in NVC Lighting in 2006 and another $10 million in 2008, giving it a 18.48 percent share. Schneider Electric owns approximately 9%.

EdisonReport has also learned that Mr Wu is extremely respected by employees, suppliers and customers alike.  So much so that several workers have been on strike and many customers have moved their business elsewhere since Mr. Wu’s departure.  In July distributors placed four demands to the Board of Directors:

  1. Reelecting Wu Changjiang as Chairman
  2. Asking certain members of senior management to quit
  3. Appointing representatives from senior management and distributors as additional directors
  4. Granting share options to some members of top management and core staff.

Andrew Yan Yan, a managing director at the Asian private equity firm SAIF Partners and current chairman of NVC Lighting Technology's board, brought the issue to a head at the Board of Directors meeting last week.  The Board supported Mr. Yan Yan and voted to not allow Mr. Wu to return to the company in any fashion.   After the vote, former Philips CEO, Kaj den Daas, who had been a NVC director, resigned his board position.

In early May NVC stock traded on the Hong Kong exchange at $3.00 per share.  On 21 JUL, trading of the stock was suspended at $1.41 per share.  Trading resumed this week, and the stock closed today at $1.01.