A man walks on a pedestrian bridge in front of a branch of Gome. The company's shareholders agreed Friday to let Huang Guangyu's corporate lawyer and sister join its board. Liu Jin / AFP

Gome Electrical Appliances Holdings Ltd, China's second-biggest electronics retailer, said the company's shareholders have approved the appointment of jailed founder Huang Guangyu's representatives to the company's board, a move which may end the long-running boardroom battle between management and the company's largest shareholder.

Shareholders agreed that Zou Xiaochun, Huang's corporate lawyer, should join Gome's board as an executive director with immediate effect. They also approved the appointment of Huang Yanhong, Huang's sister, as a non-executive director, the company said in a statement to the Hong Kong stock exchange Friday.

It also said that the board will expand to 13 directors from the current 11.

"We believe good corporate governance does not exclude big shareholders on the board," Zou said after the extraordinary general meeting Friday.

Huang Guangyu, formerly named as the mainland's richest man by Forbes magazine, resigned from the board in 2009 after a mainland court sentenced him to 14 years in prison for bribery, insider trading and illegally buying foreign currency.

The jailed billionaire still holds a stake of approximately 32.5 percent in Gome, the largest in the company, and has continued to battle from behind bars for control of the company he founded in 1987.

However, his bid to regain control of the company's management in September failed after shareholders voted against an attempt to sack company chairman Chen Xiao and replace him with Huang Yanhong.

Investors became concerned in the aftermath of the September vote after Huang Guangyu threatened to cut ties between his 376 privately owned stores and the listed company.

"We do not think that corporate governance uncertainty has been completely removed at Gome with Huang remaining the largest shareholder, but it is a strong indication that both sides are now more willing to work together to resolve the issues through dialogue and negotiations," said CCB International analyst Forrest Chan in a report released Friday.

Shares of the Beijing-based Gome surged 8 percent to close at HK$3.08 in Hong Kong trading Friday.

"The appointment is set to conclude the Gome saga and the former Chinese No 1 electrical appliances retailer can finally concentrate on its business operations," Kenny Tang, an analyst with Redford Securities, told China Daily.

Tensions between the management team and Huang Guangyu have affected the company's fundamentals and have caused it to lag behind its closest competitor, Suning Appliances, Tang added.

For the first three quarters, Gome's revenue increased 18.6 percent year-on-year to 37.27 billion yuan while net profit rose 49 percent to 1.44 billion yuan from a year earlier.

Suning, on the other hand, reaped 54.3 billion in revenue and 2.83 billion in net profit through the first nine months, representing year-on-year increases of 43.6 percent and of 30.6 percent, respectively, almost double the profit of Gome during the same period.

China Daily

(HK Edition 12/18/2010 page2)