By Mia Lamar 

HONG KONG-- Paul Singer's Elliott Management Corp. is taking aim at a titan of Hong Kong banking, questioning in court David Li's Bank of East Asia Ltd.'s nearly US$1 billion share sale to Japan's Sumitomo Mitsui Banking Corp. last year.

A group of companies tied to the US$25 billion New York hedge-fund firm has taken the Hong Kong bank and Mr. Li, its chairman and chief executive, to court to obtain information over its decision last September to sell about 222 million new shares to Sumitomo, according to court proceedings held Wednesday in Hong Kong.

Elliott has privately questioned Bank of East Asia's need to raise additional capital and suggested it is abusing a mandate to issue additional shares, according to statements made in court Wednesday by an Elliott lawyer. It has amassed a roughly 1.8 billion Hong Kong dollar (US$232 million), or 2.5%, stake in the bank, the lawyer said. Bank of East Asia has a market capitalization of HK$75.2 billion (US$9.7 billion), according to FactSet.

"We disagree with the plaintiffs. BEA and its board believe that the proposed placement is in the best interests of our shareholders as it will further strengthen the bank's core capital by means of investment on the part of a long-term committed shareholder and highly reputable financial institution," a spokesman for Bank of East Asia said.

A spokesman for Sumitomo Mitsui didn't respond to a request for comment. A spokeswoman for Elliott declined to comment.

Bank of East Asia was founded by Mr. Li's family in 1918 and is one of the last remaining family-owned Hong Kong banks. While others have sold to foreign buyers, Bank of East Asia has remained on its own.

"If someone offers three to four times book value, I would consider," Mr. Li told reporters at a briefing last year. That is a far cry from where the stock is currently trading at 1.1 times book value. The 2013 sale of Chong Hing Bank Ltd. was done for a price of 2.35 times book value, including the value of a special dividend.

Other big shareholders in Bank of East Asia are Spanish lender CaixaBank SA, with a holding of 18%, and Guoco Group Ltd., a conglomerate controlled by Malaysian tycoon Quek Leng Chan, with a 15% stake, according to FactSet. Members of the Li family together have about a 9% stake, according to FactSet.

Elliott is a familiar name to the city's bankers. The firm last year increased its stake in Hong Kong's Wing Hang Bank Ltd. as Singapore's Oversea-Chinese Banking Corp was gathering shares to complete a US$5 billion acquisition of the bank. To many, it appeared Elliott was seeking to force OCBC to raise its price, a common and increasingly successful strategy used by U.S. activist funds, but the firm walked away at the last minute.

Write to Mia Lamar at mia.lamar@wsj.com

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