Hoa Binh conflict a reminder of construction giant Coteccons’ power struggle

The ongoing internal conflict between Hoa Binh Construction Group's (HBC) board members is a reminder of the eight-year “war of power” at fellow construction giant Coteccons.

During the first days of 2023, HBC, one of the leading construction contractors in Vietnam, became the focus of attention due to a power struggle between its board members related to the position of chairman.

On January 1, four members of the company’s board, namely Nguyen Cong Phu, Le Quoc Duy, Duong Van Hung and Albert Antoine, issued a press release refuting the conflict and requesting Le Viet Hai, also a board member, not to take any action that could hinder the appointment of Phu. Meanwhile, Hai said that his return to the position of HBC chairman was completely in line with the law.

The story of Coteccons started more than 10 years ago, when the real estate market faced huge difficulties from the financial crisis. Mounting pressure forced Coteccons Joint Stock Company (Coteccons) to innovate its business model. It decided to sell 10.43 million shares, or 24.7%, via private placement to Singapore-based Kusto Group Pte. Ltd at a price of VND50,000 ($2.12) per share. The deal was worth more than VND520 billion ($22.1 million) for Coteccons.

With the help of foreign capital, Coteccons continued to make breakthroughs with an average annual revenue growth of 45%. In the peak years of 2016-2018, its average after-tax profit hit VND1.5 trillion ($63.73 million) - a huge number for the construction industry. Since then, however, internal disagreements have flared up.

After joining Coteccons, Kusto strongly opposed its business philosophy, especially the main motto "If I get VND10, you will get VND7", the brotherly business ecosystem became a weak point for the foreign shareholder to attack chairman Nguyen Ba Duong, claiming it lacked transparency. The foreign shareholder objected to the decision to merge Ricons, a company with a 15% stake held by Coteccons, with the company.

Even Duong's staff philosophy was objected to by the strategic shareholder, and exacerbated the conflict. For Duong, human resources were the most valuable asset, and he wanted to issue shares to employees. However, the foreign shareholder disagreed and demanded changes to the Employee Stock Ownership Plan (ESOP).

Following disagreements on the merger with Coteccons’ affiliate, Kusto repeatedly asked for an extraordinary general meeting of shareholders, requiring an audit of member companies. At the peak of the conflict, the foreign shareholder requested the founder and executive board to step down to pave way for the election of a new board.

Along with Kusto, another Singapore-based company The 8th Pte Ltd (The8th) - one of the major shareholders holding a 10.42% stake in Coteccons, called for Nguyen Ba Duong to be dismissed from the board.

In response, Duong's side said that Kusto's baseless accusations caused negative impacts on other shareholders and seriously affected the price of the firm’s stock, coded CTD, as well as its production and business activities. According to Duong, the interests of Coteccons were still maintained in the common ecosystem and mergers of affiliate companies into Coteccons aimed to increase its strength.

Duong even apologized to Kusto at the company's annual general meeting (AGM) and accepted two nominations to the board from the opposition in 2020, but the conflict did not stop. In October 2020, the power struggle at the company officially ended when his resignation for health reasons was quickly approved by the board.

After the founder Duong resigned as chairman and was no longer a major shareholder in the company, a series of longtime board members also left Coteccons. The board elected Bolat Duisenov as chairman of Coteccons on October 5, 2020.

At the time of leaving Coteccons after 17 years, Duong confided "Like you, I also feel hesitant to step out of the safe zone, sometimes do not dare to take risks ... But If we don't face challenges, we can't grow. Each time we fall, we learn how to get up faster."

After ending his career in Coteccons, Duong built a new construction "empire" for himself, including SOL E&C, Newtecons, Ricons, BM Windows, Boho Décor and DB.

His new “empire” is expected to earn $1 billion in annual revenue in the near future.

While Duong is gradually picking up sweet fruits two years since he left, Coteccons is facing the risk of losing its position with the implementation of many new ambitions under Kusto and declining business results due to difficulties facing the real estate market.