China's Shanshui Cement Group Ltd.'s operating unit is now under the management of Tianrui Group Co. The takeover is part of a seven month long fight between the shareholders and the now ousted chairman and founder.

Effective December 3, shareholders voted to replace Shanshui's board, installing chosen representatives from Shanshui's main rival and biggest shareholder, Tianrui Group. Among the members terminated were group founder, Zhang Caikui, Chairman Zhang Bin, and Chief Financial Officer Henry Li. China Tianrui Group Cement's chairman Li Heping, a subsidiary of Tianrui, has been appointed the chairman of Shanshui's board.

Ross Lee, a credit analyist at Bank of China Hong Kong Ltd., discusses the change in management with Bloomberg saying, "The removal of Shandong Shanshui's top management will allow Tianrui to gain more control on Shanshui from the operation and shareholder level going forward. This is positive for Shanshui's dollar bondholders as it shows Tianrui's commitment to Shanshui is growing."

The trouble began when Shanshui defaulted on the company's $500 million offshore notes due in 2020. The Wall Street Journal helps explain the hectic situation saying that Shanshui's $500 million 2020 bond grew in value to almost 90 cents on the dollar, after falling to the mid-50 cent area only a few weeks ago. The drop was due to the company defaulting on loans and filing for liquidation in a Cayman Islands court, which was rejected. The rebound occurred because the change in leadership instigated a clause, which forces the new leadership to repay the bonds early at face value.

Due to Shanshui's volatility of its $500 million 2020 notes, bondholders have been selling the notes. Tianrui had filed a report saying that if early repayment of the 2020 bonds occurs, triggered by Tianrui's restructuring of the board, it would lend Shanshui the funds to manage the payment.

The South China Morning Post has also reported that Zhang Bin and his father, Zhang Caikui, just prior to the leadership change, had been accused of illegally changing Shanshui's main operating subsidiary's article of association in order to have a stronger hold on the company. The amendment took place on October 14 as a last ditch attempt to create problems for Shanshui's shareholders.

Tianrui Group, which holds a 28.2% stake in Shanshui, has granted the China Tianrui Group Cement Company the option to buy Shanshui shares from it. This move seems to indicate that the parent group eventually wants to transfer the Shanshui holdings to its subsidiary.