Chinese restaurant group South Beauty has a lofty ambition. Its founder Zhang Lan loves to tout her chain as the future “Louis Vuitton” of the global dining market. But the 57-year-old has been running into obstacles- China’s crackdown on corruption and waste has turned bureaucrats and businessmen away from the high-end chain, as they fear of being seen in fancy restaurants. Now a widely reported dispute with private equity CVC Capital Partners is putting the group’s management in question.
On March 6, CVC obtained a Hong Kong court order freezing the personal assets of Zhang Lan and two other respondents, Grand Lan Holdings Group and South Beauty Development Limited, the Financial Times first reported. Less than a year ago, CVC finalized its purchase of an 83% stake in South Beauty, which offers spicy and pungent Sichuan-style food. Zhang Lan, who remained chairwoman of the group, had to sell her beloved brand as the chain struggled to cope with the country’s sweeping anti-corruption campaign.
Hong Kong Judge Andrew Chung didn’t reveal the cause of the dispute. Instead he noted that “very substantial sums had been paid by [CVC] and it is still unknown where those sums now are . . . Money is, of course, a relatively liquid form of asset.”
“We didn’t know what happened until we saw the news,” a South Beauty spokeswoman surnamed Zhao said by phone. “We have no idea what is behind the dispute and we are still communicating with related parties.”
Zhang Lan herself is unreachable for comment. CVC declined to comment.
The dispute is the latest twist in Zhang Lan’s rags-to-riches story. Zhang spent two years washing dishes and cooking in Toronto’s Chinatown. She saved $ 20,000 and returned to Beijing to open her own restaurant, which she sold 1999. In the following year she opened the first outlet of South Beauty in China World Center, according to a 2013 Forbes Asia profile.
Yet Zhang never succeeded in publicly listing the company, a step that would bring South Beauty long-term capital for its “Louis Vuitton” dream. Domestic stock markets shut the group out in 2012, when South Beauty was at its prime with $ 160 million in revenues.
She then turned to Hong Kong. Zhang Lan got citizenship in the remote Caribbean state of St. Kitts & Nevis and filed for an initial public offering in China’s special administrative region as the foreign principal of South Beauty Investment Co. But the company never listed.
Today, South Beauty is better known for its executives’ colorful stories. Chief executive Wang Xiaofei, Zhang Lan’s son, is in a high-profile marriage with Taiwanese star Barbie Hsu. In 2012 Wang sold Lan Club, South Beauty’s flagship luxury venue designed by Philippe Starck, to raise funds.
Wang’s arch-nemesis is Wang Sichong, the controversial son of Chinese real estate tycoon Wang Jianlin. Wang Sichong, nicknamed China’s “national husband” for his father’s wealth, has posted on his verified Sina Weibo microblog derisive comments on Zhang Lan’s dispute with CVC. The clash between the two dated back to 2011, when Wang Sichong started a war of words over Wang Xiaofei’s marriage with Barbie Hsu.
