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Hota (1536.TW), formerly known as Hehsing Industrial Co., was founded in March 1966 by Fu-Chu Tseng, who started as an apprentice in the industry. It wasn’t until January 1973 that the company was reorganized as Hota Industrial Manufacturing Co., Ltd.; in December 1975, it was renamed Hota Industrial Development Co., Ltd. At that time, the motorcycle industry was flourishing, which allowed Hota, engaged in the production of automotive components, to operate smoothly. Consequently, the company lacked the necessary sense of crisis.
In 1985, Bajaj, a motorcycle industry player, exported goods to China but was unable to recover the payment. The company’s owner also engaged in the unauthorized sale of company assets for personal gain. As a result, the checks issued by Bajaj to Hota bounced, leading to a bad debt of NT$105 million. Over the next five years, Hota, though not collapsing, found itself in financial turmoil. It wasn’t until 1990, under the recommendation of creditor banks, that Guo-Rong Shen took over as the chairman. The company underwent a comprehensive restructuring and was renamed Hota Industrial Co., Ltd.
Following its successful restructuring, Hota firmly established itself in the market. In March 2000, the company was listed on the OTC market, and by September 2001, it transitioned to become a publicly traded company. With Guo-Rong Shen as the ultimate controller, the Hota Group took shape.
Over the past two decades, how did the Hota Group grow and expand its conglomerate? What motivated its strategic decisions to invest in companies such as Kafo, Duro, and Mediera? In this article, we will provide an overview of each member’s operations within the Hota Group and explain the timing and methods of the Hota Group’s acquisitions, offering you a deeper insight into the development history of the Hota Group.
Kafo (4510), formerly known as Kafo Iron, was founded by its founder, Chun-Ding Chuang, in May 1968. In 1972, it was reorganized as Kafo Machinery Co., Ltd.; in February 1979, it became Kafo Machinery Industrial Co., Ltd. In October 1991, the company went public with its stock offerings. At that time, Kafo was a standalone company and had yet to form a group.
In 1992, Chun-Ding Chuang expressed his intention to relinquish the management rights of Kafo. Kafo, in a strategic alliance, entered into a stock-swap agreement with the Chuang family of the Far Eastern Machinery Group. In October of the same year, an extraordinary shareholders’ meeting was held for the election of directors and supervisors. Chun-Ding Chuang stepped down as the chairman of Kafo, handing over the position to Guo-Qin Chuang of the Far Eastern Machinery Group. Other family members from the Far Eastern Machinery Group also joined the board of directors. Concurrently, Kafo changed its name to Kafo Industrial Co., Ltd. In February 1998, it was officially listed on the OTC market. In May 1998, out of a total of 9 directors and supervisors, individuals associated with the Far Eastern Machinery Group secured 4 director seats and 1 supervisor seat, holding a 34.35% share. Kafo became a part of the Far Eastern Machinery Group from then onwards.
In 2005, Kafo faced the impact of macroeconomic regulation in mainland China, with its operating profit plummeting from NT$59,005 million in 2004 to a loss of NT$-58,225 million in 2005, transitioning from profit to deficit. Concurrently, the domestic machinery industry was undergoing a resource integration movement involving several major players such as Hota, Yawei, Chengtai, and Chunxin De. They planned to jointly establish the “Automotive Component Manufacturing Machinery Association” to capture a significant global market share. In response, Kafo held an extraordinary shareholders’ meeting in January 2006 to elect two vacant director positions, allowing Hota Group to enter the board of directors.
By May 2006, Far Eastern Machinery Group gradually withdrew from the Kafo management. Chairman Guo-Hui Chuang stepped down from his dual role as general manager. In January 2007, he resigned as chairman, citing busy business commitments, and was succeeded by Guo-Rong Shen from the Hota Group.
In January 2007, the management of Kafo underwent a change, with Hota Group taking over, thereby becoming a part of Hota Group. By April 2007, Kafo had a total of 10 directors and supervisors. Through Co-Winner Investment, Co-Diamond Investment, ChunHui Investment, and Guo-Rong Shen, Hota Group collectively held a 15.78% share in the company and held three director positions, including the chairman’s position. This gave Hota Group both significant ownership and control over the board seats.
Duro (2109), formerly known as Duro Rubber Factory, was established in September 1945 by three Hu Zhang, along with his friends Jin-Bao Yang and Ke-Zhong Yan. It was the first tire factory established in Taiwan after the post-war recovery. In May 1959, the company was restructured. It became Duro Industrial Co., Ltd. Subsequently, in September 1970, the company changed its name to Duro Rubber Industry Co., Ltd. Duro operates as a conglomerate with a family-based governance structure.
Initially, Duro Rubber was led by Hu Zhang as the chairman. In 1975, the second generation, Qing-Yuan Zhang, took over as chairman. In 1997, when Qing-Yuan Zhang retired, it was initially intended for the third generation, Ying-Zhou Zhang, to succeed as chairman. However, considering his limited experience, Ming-Shan Yan from the Yan family took over instead. It wasn’t until June 2003, with the support of major shareholder Japanese Sumitomo Rubber Industries, that Ying-Zhou Zhang was elected as chairman.
Both the Zhang and Yan families faced governance-related challenges for a long time, as both were implicated in stock market manipulation allegations in 2003, leading to legal actions against them.
At that time, market speculator “Da Ye Zhang,” led by Tao Zhang, began acquiring Duro’s stock in the market. In June 2009, during the board and supervisor election, Da Ye Zhang entered Duro’s board of directors and elected Chen Heng-Yi as the new chairman. In April 2010, Duro had a total of 10 directors and supervisors. Through China Ruisui and China Gleaner, Da Ye Zhang collectively held 1.02% shares and held three director positions and one supervisor position, including the chairman’s seat. TEJ considers June 2009 as the point when Duro came under the control of Da Ye Zhang, ending the long-standing joint governance by the Zhang and Yan families.
Externally, Tao Zhang portrayed himself as a consultant, but in reality, he was the person in charge of Duro. Tao Zhang took control of Duro’s operational authority but did not intend to focus on its operations. He convinced other directors to use the funds originally allocated by Duro for its subsidiaries, China Hua Fong Enterprise and China Hua Fong Biotechnology, for mainland China investments, which he personally managed in the stock market, willing to bear the responsibility for gains or losses. Starting from August 2009, he used the funds in the securities accounts and settlement accounts of China Hua Fong Enterprise and China Hua Fong Biotechnology to trade the stock of Astral Epoch (8082).
In 2012, Heng-Yi Chen colluded with Tao Zhang to deplete Duro’s funds for stock speculation. They faced prosecution, and Heng-Yi Chen resigned as chairman of Duro. Majority shareholder Duro Tire appointed Qian-Ming Luo as the new chairman. In April 2013, they appointed Tao Zhang’s friend, Ming-Fen Su, as the chairman. Mingfen Su, her friends Zhi-Fen Guo and Yong-Yi Huang, and his wife entered the board of directors, firmly securing control of Duro’s operations.
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In 2014, at the invitation of Ming-Fen Su, the Hota Group, under the name of Daan Yong Kang, made an investment in Duro. During the board and supervisor election in May, they successfully secured three director positions, with Shen Guo-Rong being one of them. At the same time, in June, Duro signed a syndicated loan agreement of approximately NT$1.6 billion, intended for increasing production capacity and expanding the company’s scale. However, an unexpected turn of events occurred at the end of 2017 when the Chairman and Vice General Manager were embroiled in a financial dispute. This led to the suspension of the syndicated loan’s utilization by the lead bank, pending the resolution of the dispute.
Therefore, in January 2018, Chairman Ming-Fen Su and General Manager Yong-Yi Huang resigned to avoid affecting the syndicated loan case. Chen-Xuan Liao, hailing from a prominent local family in Taichung, took over as chairman. However, in April, he also resigned for personal reasons, and the board of directors appointed Guo-Rong Shen as the new chairman.
In November 2018, the Hota Group acquired the major shareholders of Duro, Fengzuan, and Hanyuan Xinran Enterprise, officially taking control of Duro and thus becoming a member of the Hota Group. In April 2019, Duro had a total of 9 directors and supervisors. The Hota Group, through Rich Diamond, HanYuan XinRan Enterprise, Guo-Rong Shen, and Xing-Hong Liu, collectively held 6.12% shares and held three director positions and two supervisor positions, including the chairman’s seat.
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Mediera Corp. (5398), formerly known as Liwei Industrial Co., Ltd., was founded by former Chairman Hong-Jie Cheng in June 1978. The company changed its name to Liwei Industrial Corporation in May 1989. Liwei conducted a public offering in October 1997 and was listed on the OTC market in October 1999. It subsequently became a group corporation.
In 2013, Liwei partnered with Duro, expanding into tire sales and maintenance. By June 2014, Chairman Hong-Jie Cheng left Liwei, Ming-Fen Su from Duro became the new chairman, and her team joined Liwei’s leadership. TEJ marked June 2014 as the point when Liwei came under Da Ye Zhang’s control. In April 2015, Liwei had seven directors and supervisors. Ming-Fen Su and her associates collectively held an 18.84% share through various investments and five director positions, including the chairman’s seat.
In August 2015, Liwei, facing tire division underperformance, saw major shareholder Zhen Da Investment, a renowned health product “‘Viartril-S” distributor through Great Union Trading Group, taking control. Zhen Da Investment appointed Tian-Ci Zeng as chairman, marking the point of control shift in August 2015.
By April 2016, Liwei had seven board members. Great Union Trading Group, represented by Zhen Da Investment, Tian-Ci Zeng, De-Lun Dang, De-Lin Dang, and Su-Tian Chung, held a 16.09% share and occupied three board positions, including the chairman’s.
In 2016, Liwei entered biotechnology through private placement, acquiring four biopharma companies and Aliyah International, a biotech distributor under related parties. Subsequently, Great Union Trading Group used a reverse merger for listing, and in July 2017, Liwei changed its name to Mediera Biotechnology Corp., focusing on biotech and pharmaceuticals.
In August 2018, internal conflicts erupted within Mediera’s management team, leading to the removal of Chairman Tian-Ci Zeng by major shareholder Zhen Da Investment. Xu-Ren Huang was appointed as the new chairman. Mediera has been experiencing declining revenues since 2017, with operating profits dropping from 17m NTD in 2016 to -5.3m NTD in 2017. In 2018, the operating loss further widened to -39m NTD.
On the other hand, after the entry of the Hota Group into Duro in 2018, there were active restructuring efforts within Duro’s internal structure. Duro, having exited Mediera in 2015 but still being a major shareholder, had a certain level of influence on Duro. Therefore, Guo-Rong Shen decided to take over Mediera. In the 2020 board and supervisory committee elections, he secured the chairman’s position and purchased Zhen Da Investment from the Great Union Trading Group. TEJ considers June 2020 as the point when Mediera came under the control of the Hota Group. In April 2021, Mediera had a total of 7 directors, including three independent directors. Through Duro Distribution, Duro Rubber Industry, and Zhen Da Investment, the Hota Group collectively held a 25.1% share and occupied four director positions, including the chairman’s seat.
In summary, when observing the formation of the Hota Group to take over various companies, it’s clear that Hota Group entered Hota and Kafo due to poor management, while Duro and Mediera Biotech. were taken over because of disputes within their original management. Unlike the Tai Shan and Shin Kong cases, the Hota Group did not use proxy agreements or extraordinary shareholder meetings to remove directors and gain control. Instead, they acted as a firefighting team to take over these companies and attempt to improve their operations. In hindsight, except for Mediera, which still faced losses, the other members gradually improved their performance after joining the Hota Group.
In 2007, Hota Group took over Kafo, which was facing losses in 2006. After the acquisition, Kafo doubled its revenue and turned operating losses into a profit of 52 million NTD by 2022. Similarly, Duro Rubber, acquired in 2018, saw a slight revenue decline but achieved a remarkable sixfold growth in core business profits.
Hota Industrial, listed for nearly 23 years, has witnessed substantial growth in both revenue and profitability through strategic acquisitions and adaptive business approaches. Chairman Guo-Rong Shen’s leadership and strategic acumen are crucial elements. He is known for identifying core issues in underperforming companies and implementing effective reforms to drive growth. Hota Group’s expansion extends beyond the mechanical industry with ventures into biotechnology. Who’s the next target? It’s rumored that the forging wheel manufacturer SuperAlloy is likely the next member of Hota. If this comes true in the future, it will be a significant milestone for both companies!
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