Du Shuanghua, a Chinese billionaire, established and has managed Rizhao Steel since 2003. In his control, it became one of China’s largest private steel manufacturers and was once ranked as the 26th largest steelmaker globally. This remarkable success has not come without its flaws, as the firm was involved in one of the largest controversies in China’s business industry.
In 2009, Shandong Steel Company, a state-owned company, tried to take over Rizhao Steel forcefully. This caused a public uproar, indicating emerging renationalization, but it never made Shandong steel back down. Du Shuanghua tried everything in his power to stop the hostile takeover and even came to the point of selling a 30% equity stake of his company at a throw-away price. These stakes were sold to Kai Yuan Holdings, a Hong-kong based business managed by the family relatives of the Chinese president, Hu Jintao. This was an attempt to provide some protection from the state-owned Shandong Steel Company’s takeover as it would be considered property of the president to some degree. This plan failed as they refused to associate Rizhao Steel with President Hu because it would adversely affect him politically.
Left with no choice, Du Shuanghua sold a 67% stake of Rizhao Steel to Shandong Steel. In 2009, they signed an agreement on asset restructuring and cooperation, marking Rizhao’s reorganization. The agreement stated that the two companies were to jointly inject funds into the JV for the reorganization of assets and clarify the reconstructing principles. Shandong steel was to hold 67% stakes by cash and Rizhao steel to hold 33% stock with net assets.
In 2010, Du Shuanghua sold the remaining stakes (33%) of Rizhao steel to Shangdong. This move surprised many as it was not part of the original agreement of 2009. Shuanghua retained his position as the chair of Rizhao steel.