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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