Wow - it seems A2 Andy, Peter Nathan, & Kristy & Dennis are very...

Rear Window

A2 Andy’s aversion to discovery

Myriam Robin

16 July 2023

Australian Financial Review Online

Amid all the salacious claims and counter-claims flying in the duelling Bubs campaigns, perhaps the most salient strategic issue facing shareholders at the July 27 meeting is whether they want to continue the relationship with Bubs’ daigou partner, AZ Global.

Bubs’ current board, led by former King & Wood Mallesons partner Katrina Rathie, argues AZ squibbed it, failing to move truckloads of infant formula in China that now sits clogging up warehouses and depressing its ability to make any new sales. It’s suing AZ for $5.6 million in allegedly overdue debts in Hong Kong.

Meanwhile, AZ – run by Andy Zhang and backed by Malaysian billionaire and former jailbird Lee Ming Tee – argues Bubs owes it money, claiming the “strategic partnership” for which it was paid partly in stock was actually more of a consignment arrangement. For unsold and ageing formula, AZ is now seeking $20 million in a mix of cash and trade credit. While, of course, it throws its shares into an attempt to spill the board, organised by recently ousted co-founder Kristy Carr.

The dissident coalition is proposing ex-A2 executive Peter Nathan to lead Bubs, and have nominated him as a director at the upcoming extraordinary general meeting. He pioneered A2’s juggernaut China strategy with Zhang (aka “A2 Andy”), and now says the best way to correct the business is to re-engage his former daigou client (AZ being “the most capable player in this space”).

Zhang, for what it’s worth, stopped buying A2 Milk tins partly because after Nathan’s exit the company had stopped allocating AZ Global so many, diversifying its sellers by pursuing a cross-border e-commerce strategy. Zhang told this newspaper he felt used and taken for granted by this shift, and soon after switched his attention to Bubs, where he’s now doing all he can to help install Nathan.

The endurance of this relationship is more than can be said for some of Zhang’s other entanglements.

In June 2020, two of his companies launched proceedings against business partner Ming Che, customer Bo Zhang and truck driver Lin Zheng in the Victorian Supreme Court, accusing them of skimming $10.4 million in powdered milk stock to sell to third parties and fraudulently covering their tracks, which they denied. All three defendants had their assets frozen for lengthy periods of time.

But Zhang’s companies had by October 2022 failed to comply with the court’s discovery orders to hand over documentation about the allegations to those being sued. The defendants applied to have the case dismissed on this basis. At a hearing to decide the issue, the plaintiffs were granted leave to withdraw their case.

In light of the seriousness of the withdrawn allegations, and the disruption to the lives and reputations of the defendants, Judge Jim Delaney awarded costs against Zhang on an indemnity basis. That is, he was ordered to pay the overwhelming majority of everyone’s legal fees.

These costs were awarded against Zhang personally, rather than to his companies, after the defendants submitted that A2 Andy had “established a labyrinthine corporate structure and transferred many tens of millions of dollars from the plaintiffs for his own benefit”.

The whole debacle – which concluded in May – left Zhang with a bill close to $1 million, not counting his own fees. It’s one more reason to hope the Bubs EGM he’s sponsoring succeeds in placing his allies back in charge.

Wow - it seems A2 Andy, Peter Nathan, & Kristy & Dennis are very intertwined. Doesn't smell great.
Australian Financial Review Online
Rear Window
A2 Andy’s aversion to discovery
Myriam Robin
16 July 2023
Amid all the salacious claims and counter-claims flying in the duelling Bubs campaigns, perhaps the most salient strategic issue facing shareholders at the July 27 meeting is whether they want to continue the relationship with Bubs’ daigou partner, AZ Global.
Bubs’ current board, led by former King & Wood Mallesons partner Katrina Rathie, argues AZ squibbed it, failing to move truckloads of infant formula in China that now sits clogging up warehouses and depressing its ability to make any new sales. It’s suing AZ for $5.6 million in allegedly overdue debts in Hong Kong.
Meanwhile, AZ – run by Andy Zhang and backed by Malaysian billionaire and former jailbird Lee Ming Tee – argues Bubs owes it money, claiming the “strategic partnership” for which it was paid partly in Bubs shares was actually more of a consignment arrangement. For unsold and ageing formula, AZ is now seeking $20 million in a mix of cash and trade credit. While, of course, it throws its shares into an attempt to spill the board, organised by recently ousted co-founder Kristy Carr.
The dissident coalition is proposing ex-A2 executive Peter Nathan to lead Bubs, and have nominated him as a director at the upcoming extraordinary general meeting. He pioneered A2’s juggernaut China strategy with Zhang (aka “A2 Andy”), and now says the best way to correct the business is to re-engage his former daigou client (AZ being “the most capable player in this space”).
Zhang, for what it’s worth, stopped buying A2 Milk tins partly because after Nathan’s exit the company had stopped allocating AZ Global so many, diversifying its sellers by pursuing a cross-border e-commerce strategy. Zhang told this newspaper he felt used and taken for granted by this shift, and soon after switched his attention to Bubs, where he’s now doing all he can to help install Nathan.
The endurance of this relationship is more than can be said for some of Zhang’s other entanglements.
In June 2020, two of his companies launched proceedings against business partner Ming Che, customer Bo Zhang and truck driver Lin Zheng in the Victorian Supreme Court, accusing them of skimming $10.4 million in powdered milk stock to sell to third parties and fraudulently covering their tracks, which they denied. All three defendants had their assets frozen for lengthy periods of time.
But Zhang’s companies had by October 2022 failed to comply with the court’s discovery orders to hand over documentation about the allegations to those being sued. The defendants applied to have the case dismissed on this basis. At a hearing to decide the issue, the plaintiffs were granted leave to withdraw their case.
In light of the seriousness of the withdrawn allegations, and the disruption to the lives and reputations of the defendants, Judge Jim Delaney awarded costs against Zhang on an indemnity basis. That is, he was ordered to pay the overwhelming majority of everyone’s legal fees.
These costs were awarded against Zhang personally, rather than to his companies, after the defendants submitted that A2 Andy had “established a labyrinthine corporate structure and transferred many tens of millions of dollars from the plaintiffs for his own benefit”.
The whole debacle – which concluded in May – left Zhang with a bill close to $1 million, not counting his own fees. It’s one more reason to hope the Bubs EGM he’s sponsoring succeeds in placing his allies back in charge.