Minth Drops After Regulator Says Deal Disclosures Inaccurate

Apr 14, 2014 4:29 am ET

(Updates with comment from analyst in fourth paragraph.)

April 14 (Bloomberg) -- Minth Group Ltd., a supplier of auto parts, plunged the most on record in Hong Kong trading after the city’s securities regulator accused the company of inaccuracies in its disclosures for two acquisitions.

Minth fell 20 percent to HK$11.84 at the close of trading, the biggest decline since its initial public offering in December 2005. The benchmark Hang Seng Index rose 0.2 percent.

Hong Kong’s Securities & Futures Commission filed a petition against Minth alleging its acquisitions of Talentlink Development Ltd. and Magic Figure Investments Ltd. were “not genuine” and “void or voidable,” the Zhejiang, China-based company said in a statement today. Minth said it completed the purchases of Talentlink and Magic Figure for about 88.6 million yuan ($14 million) from Chairman Chin Jong Hwa’s nephew and niece, in April 2008.

“The market actually over-reacted, because the issue was known to the market since 2009,” said Joseph Wong, a Hong Kong- based analyst at Nomura International Hong Kong Ltd., who has a buy rating on the stock. “In terms of production capability and technological R&D, I don’t think there’s a problem. The impact is not related to the company, it’s related to the behavior or integrity of the chairman.”

The commission is asking that the High Court order Chin, the company’s controlling shareholder, to pay $12.7 million plus related interest to a subsidiary, Decade (HK) Ltd., which acquired Talentlink and Magic Figure.

High Court

It is also seeking for the High Court to bar Chin, Chief Executive Officer Shi Jian Hui, Executive Director Zhao Feng, and former Executive Director Mu Wei Zhong, from being a director, liquidator, receiver, or manager of any company in Hong Kong, according to the statement.

Minth is seeking legal advice and an initial court hearing is set for July 9, the company said.

Minth’s customers include General Motors Co. and Volkswagen AG, according to the company’s website. It has factories in China, the U.S., Thailand and Mexico and supplies auto parts including seat frame systems and roof racks, the website showed.

Chin, a graduate of China Urban Administration College, founded Minth Group in March 1997, according to the company’s 2012 annual report. He owns 40 percent of Minth, according to data compiled by Bloomberg.