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China's Fosun shares halted after report says billionaire founder Guo unreachable

China's Fosun shares halted after report says billionaire founder Guo unreachable

(Reuters) — Shares in firms controlled by Guo Guangchang, one of China's best-known entrepreneurs, were suspended in Hong Kong and the mainland after a financial magazine said Fosun International Ltd. had lost contact with its billionaire founder and chairman.

The report by online publication Caixin stoked speculation among company watchers and investors that the self-styled student of investor Warren Buffett may have become the latest high-profile Chinese businessman to be quizzed by regulators as part of a widespread anti-corruption crackdown by Beijing.

Caixin reported late on Thursday, quoting unidentified sources, that Fosun had been unable to reach Mr. Guo since noon local time on Dec. 10. In a statement on Friday, Fosun International said it had requested a trading halt pending the release of an announcement, at an undisclosed time, containing what it described as "inside information".

A Fosun International spokesman in Hong Kong told Reuters the firm was operating as normal, declining to comment on the report or Mr. Guo's whereabouts.

If confirmed, Mr. Guo's absence would make him the most high-profile of a string of senior executives of top companies found to have gone missing temporarily amid Beijing's continuing crackdown, sending a strong signal about how serious China is about ramping up scrutiny of its financial sector.

CITIC Securities Co. Ltd., China's biggest brokerage, said on Dec. 6 it wasn't able to contact two of its top executives following media reports that they had been asked by authorities to assist in an investigation.

"Guo is one of the high-profile Chinese entrepreneurs, and this incident will raise eyebrows among foreign regulators as Fosun has been aggressively expanding its global insurance footprint," Sally Yim, senior credit officer with Moody's Investors Service said. "But it is too early to say how this incident will impact Fosun's operations," she said.

In May of this year, Fosun agreed to buy the 80% of Bermuda-based insurer Ironshore Inc. that it did not already own for $1.8 billion, and in December 2014 it agreed to buy Southfield, Michigan-based insurer Meadowbrook Group Inc. for $433 million.

The 48-year-old Mr. Guo further underlined his global ambitions earlier this year, closing a billion-dollar takeover of the French Club Med holiday resort chain. It also owns marquee real estate, including One Chase Manhattan Plaza in New York, bought in 2013 for $725 million.

Fosun, which has spent more than $30 billion on foreign acquisitions, is now in the middle of a takeover battle to buy Anglo-German lender BHF Kleinwort Benson, as well as chasing other deals in Europe as part of its global expansion plans.

Empire builder

After the Caixin report was published, Fosun's overseas depository receipts in New York fell 6.6% overnight in unusually heavy over-the-counter trading, according to Thomson Reuters data.

Mr. Guo has built an empire of industrial companies, alongside a host of insurance, banking and asset management firms. He is a delegate to the Chinese People's Political Consultative Conference and has amassed a personal net worth of $5.7 billion along the way, according to Forbes.

Born poor in a rural village in the southeastern province of Zhejiang, Mr. Guo studied philosophy at the elite Fudan University in Shanghai before founding his first firm in 1992 alongside classmates as an information services company with 100,000 yuan ($15,495) in capital.

His business empire now ranges from Portuguese insurer Fidelidade — an acquisition closed in January this year — to slices of theater company Cirque du Soleil and holiday operator Thomas Cook. Fosun International had total assets, spread across, insurance, health, steel, banking, worth $55 billion at the end of June 2015.

In August this year, Fosun and Mr. Guo were named by a Chinese court in relation to a bribery case against Wang Zongnan, former chairman of state-owned Bright Food Group Co., who was sentenced to 18 years in jail.

State news agency Xinhua said at the time Mr. Wang's parents had bought two villas in Shanghai developed by Fosun at below-market prices, and that Mr. Wang had used his position to seek benefits for Fosun. The latter said it had "never sought to inappropriately benefit" and had "never delivered benefits to Wang Zongnan."

China watchers said any confirmation that Mr. Guo faces specific scrutiny from regulators would reverberate around the international investment community.

"Should Guo, well-known abroad, be found to be at the center of a graft investigation, this would be a strong signal to the world that China is serious about its anti-corruption campaign," said Alberto Forchielli, founder of private equity firm Mandarin Capital Partners with 20 years of experience in China.

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