The chinese press conference never held …… for now

Fortis stock 2 years chart. Ping An, the chinese insurance company bought shares at 19 Euros in 2007.

More about credit crunch. It has remained hidden for several months but finally Fortis, the Belgian-Dutch financial services group, said Thursday that it would sell new shares and pay no interim dividend as part of a package to shore up its finances by more than 8 billion Euros. All these measures announced by Jean-Paul Votron CEO of Fortis were a big surprise for the market. Fortis shares fell nearly 20% on thursday valuing all the group in only 23 billion euros. In early 2007 the company market cap were more than 60 billion euros. Fortis has been a centre of rumours about possible losses over the past few months, but it’s executives had repeatedly and continuously denied any problem.

This is a full English transcript of the press conference by Jean Paul Votron and Gilbert Mittler its CFO (chief financial officer), explaining the results of 2007. in a triumphal atmosphere, with words like, “we have a very strong business momentum” or “We have successfully completed the acquisition of ABN Amor”, or “successful execution of the strategy”, or “we are also happy to propose a dividend of EUR118 per share for 2007 confirming by the way one of our key topics of our strategy and our positioning which is our dividend policy.”

They said the company profit estimation for 2008 is 5 billion euros, maintaining the dividend as an important policy of the company….¡¡¡¡¡¡¡¡¡¡¡¡¡¡

Where is ethics in business?, Maybe in this long cycle of strong global economic growth that has lasted several decades, have lost the principles that should govern in any company?. This reminds me of the recent case of the CEO of Hypo Real State (see my post “what if deceive the market“).

When I read the Fortis annoncement, I remembered then that the second china insurer, Ping An Insurance (Group) Co. (2318.HK), purchased in late 2007 5% of Fortis shares.

Ping An bought Fortis 95.01 million shares for 1.81 billion euros ($ 2.7 bilion) at an average price of 19.05 euros per share. It meant a theoric PER (price to earnings ratio) of only 7 times estimated 2008 profits and only 1.1 times book value estimated for 2008.

This enormous investment of the chinese company based in Shenzhen, was the largest outward investment from an insurance chinese company. Instead, the first china insurer, China Life Insurance (LFC code in New York and Hong kong 2628.HK), has been much more cautious, has announced that he wanted to do some international investment but still has not decided on any.

Ma Mingzhe photo, chairman of Ping An insurance.

When Ping An invested in Fortis, its chairman Ma Mingzhe said that this operation would create a “win-win situation” for the chinese company. Mr. Ma explained then that the agreement would generate huge profits.

Ping An has just announced through a press release, this Friday it planned to buy 5 percent of the shares offered by Belgian-Dutch financial services group Fortis to avoid dilution.

“We are participating in the Fortis placement to avoid dilution,” a spokesman said.

“We want to remain the single largest shareholder of Fortis … that’s why we are buying 5 percent of the share sale.”

If I were the chinese company CEO having lost nearly 1 bilion Euros in about 6 months, based on official numbers about a company that has been proven false, first of all, I would travel immediately to London or Brussels and announce a press conference. first asking the resignation of Jean Paul Votron for having lost all confidence after having lied to the market in continuous public statements and in the annual accounts public. And secondly, after the press conference, go to judicial court to file complaint for fraud related the annual report of the company.

In the next future, chinese, indian an other emerging markets companies, willl use their political rights derived from their investments, to pressure the managers of major Western companies.

See also this interesting link, is an interview in 2004 with Jean Paul Votron, just 3 days starting as CEO of Fortis. You can see the 5 principles that should have a general manager or CEO of a company. The third, fourth and fifth principle has not complied, the first and second, I do not know.

Jean Paul Votron is to the left. Although ABN AMRO 3 buyers were very happy, to date the only one who can laugh today really is Mr. Emilio Botin, Banco Santander’s CEO. ¿Does the current weakness in Royal Bank of Scotland (RBS) after the purchase of ABN AMRO, offer an oportunity to mr. Botin and Banco Santander to propose a takeover to RBS? See my post about RBS problems ( “shareholders want to throw the president of the bank“)