NVC Lighting Power Transition after Merge with ETI Gets Ugly

Latest developments in the aftermath of NVC Lighting’s merge with Elec-Tech Technology (ETI) has gotten fairly messy, according to several Chinese media reports.

Transitions after the merge turned violent after a recent company board meeting, with three NVC Lighting employees physically assaulted by ETI staff last Friday, according to a Money 163.com report.

NVC Lighting office door is rammed down by ETI staff during a recent dispute. (Photo Courtesy of Money 163.com)

Victims of the attack reported ETI Chairman Wang Donglei forced his way into former NVC Lighting CEO Wu Changjiang’s office, and instructed employees to assault NVC Lighting staff, which included two of Wu’s assistants and his driver. The three employees Chen Xianfeng, Zhao Cunfei, and Zhang Xiong sustained minor injuries and concussions after the assault, and are recovering at a hospital in Chongqing, Guangdong and China.

Hospitalized NVC Lighting staff, after things got a bit too physical with ETI staff. (Photo Courtesy of Money 163.com)

Things have taken a sinister turn for Wu, who lost his long battle to regain control over NVC Lighting board. Board members have unanimously voted in favor for Wang to step in as the company’s new CEO on Aug. 8, 2014, according to a recent company press release. The Chinese version of the press release cited Wu’s suspected gambling debt record as the main reason behind his removal from post, and also pointed out wrongdoing and other dishonest conduct. According to Wang, Wu’s gambling debts in Macau amounted to RMB 400 million (US $64.99 million) making him unfit to act as company CEO.

In 2012, Wu signed a 20-year NVC Lighting brand licensing agreement on behalf of the Company’s subsidiary , Huizhou NVC Lighting Technology, with each of three companies, namely, Shandong NVC Lighting Development (山東雷士2 照明發展有限公司), Chongqing En Wei Xi Industrial (重慶恩維西實業有限公司), and Zhongshan Sheng Di Ai Si Lighting without the Board’s acknowledgements. The board has carried out further investigations into the matter. Wang pointed out Wu’s decision seriously impacts the company’s profitability and is unacceptable.

Wang also accused Wu of secretly draining company profits, and channeling the finances into three subsidiaries that he has full ownership over, according to a report by Chinese-language media The Economic Observer. Wu Changyong, the brother of former NVC Lighting CEO, had acted as a supplier to the new companies established by Wu Changjiang. The two brothers then sold the products at a higher price back to NVC Lighting. It is believed Wu destroyed most evidence of any wrongdoing, but the company will continue to probe into potential misconduct and send any evidence found to legal authorities.

Wu has repeatedly refused to step down as NVC Lighting CEO, and has retained company legal documents and other business transaction papers, said Wang. He went on mentioning he was not aware of Wu’s actions till three weeks ago.

Adding to the drama, Wu rebutted by accusing Wang of shifting NVC Lighting’s core business and profits to fill ETI’s financial gap in June 2013. In an interview with Tencent reporters, Wu pointed out Wang tried to shift all of NVC Lighting’s light source products to ETI sales channels, and taking full credit over generated revenue. Light source products account for 25 percent of NVC Lighting’s revenue, and ETI’s actions would seriously impact company revenue, explained Wu. He also accused Wang for violating previous agreements by sneakily meeting with distributors and high ranking company officials in Zhuhai.

He also went on claiming the recent fall out had more to do with control over distribution channels. Wang proposed Wu should repurchase all of NVC Lighting stocks if his intention was to stay, or otherwise he should just leave on July 18, 2014. Many NVC Lighting distributors did not support Wang’s decision and were willing to finance Wu, even meeting up in Beijing on July 28, 2014 to form a distribution alliance. According to Wu, this triggered the hostile turn of events.

In the same report, Wu claimed previous arguments with Wang over the dismissal of Vice President Mu Yu in June 2013 created tension between the two. Wang wanted “the traitor” Mu to resign over suspected leak of product transactions between to two companies to NVC Lighting stockholder Andrew Yan of SAIF Partners. Wu, though, spoke in favor of Mu, who was one of the founding employees.

According to Wu, Wang had long planned his ousting. Senior ETI officer revealed Wang would have asked Wu to resign by fourth quarter anyways. Wu did not directly address Chinese reporters’ inquiries about his gambling debts, saying his private life was his own business. Wu demanded Wang to present evidence to back his claims.

Who is telling the truth? Perhaps only time can tell.

(Editor: Judy Lin, Chief Editor, LEDinside)

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