HK family-run bank under fire from hedge fund
ACTIVIST investor Elliott Management Corp, frustrated by poor returns at Bank of East Asia (BEA), is trying to persuade shareholders to defy the board.
The shareholder votes on proposals, including renewing some directors' tenure and a mandate to issue new shares, pit the US$27 billion (S$36 billion) hedge fund founded by billionaire Paul Singer against BEA's flashy chairman David Li, whose grandfather founded the bank nearly 100 years ago.
The dispute illustrates the tension between minority shareholders in Asia pushing for better returns and transparency and local firms used to running their listed businesses with less scrutiny of corporate governance than in the United States and Europe.
Elliott has built a 7 per cent stake and says the stock's underperformance is down to weak management.
BEA is the last big family-run bank in Hong Kong but its profitability lags its listed peers. In February, Elliott called for the US$10 billion bank be put up for sale.
"Elliott is personally challenging me. I will stand up for a good fight," Mr Li said at the annual results briefing in February.
Elliott has already drawn some blood at BEA, opening a court inquiry into last year's issue of new bank shares to Japan's Sumitomo Mitsui Banking Corp, a unit of Sumitomo Mitsui Financial Group.
Some investors say such share dilution is aimed at protecting the Li family's control.