Activists take on passivists in HK share spat

Guoco

12/02/2015 04:26

(The author is a Reuters Breakingviews columnist.  The opinions 
expressed are his own.) 
    By John Foley 
    BEIJING, Feb 12 (Reuters Breakingviews) - Hedge fund Elliott 
has challenged Bank of East Asia's plan to issue a slab of stock 
to a friendly shareholder. Investors can theoretically stop 
these kinds of deal, but often don't. The activists' chance of 
success is slight, but they raise some good questions.    
         
    Full view will be published shortly. 
     
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    CONTEXT NEWS 
    - Five funds affiliated with Elliott Management, the U.S. 
hedge fund, have filed a legal challenge to Bank of East Asia 
over its plans to issue stock to Japan's Sumitomo Mitsui Banking 
Corp. The summons served in January on the company and all of 
its board directors was the subject of a brief hearing in Hong 
Kong on Feb. 11. 
    - The hedge fund has requested documentation on BEA's 
decision to issue 222 million shares, equivalent to 9.5 percent 
of the current share base, to SMBC under a "general mandate", 
which allows Bank of East Asia's directors the unconditional 
right to enlarge the share base by up to ten percent without 
consulting shareholders. 
    - SMBC already owns 9.1 percent of BEA's stock, according to 
Eikon data. Caixabank owns 18 percent, while Malaysian 
investment company Guoco Group holds 15 percent. Elliot holds 
2.5 percent of BEA directly, and also has a small stake in Guoco 
Group. 
    - General mandates are commonly used in Hong Kong, where 
they require 50 percent approval of shareholders at the annual 
general meeting. At BEA's last meeting in May 2014, 33 percent 
of votes were against the renewal of the mandate. 
 
    - For previous columns by the author, Reuters customers can 
click on  FOLEY/  
 
    
 
 (Editing by Peter Thal Larsen and Katrina Hamlin; https://twitter.com/johnsfoley) 
 ((john.foley@thomsonreuters.com)(Reuters messaging: 
john.foley.thomsonreuters.com@reuters.net)) 
 
Keywords: BANK EAST ASIA BREAKINGVIEWS/