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Monday, July 18, 2016, 18:36

Elliott ramps up pressure on Bank of East Asia with lawsuit

By Bloomberg

HONG KONG - Billionaire Paul Singer’s Elliott Management has started legal proceedings against the Hong Kong-listed Bank of East Asia Ltd, alleging “serious corporate governance failings” that have entrenched management and diluted the stakes of minority shareholders.

The action is also against directors including Chairman David Li, the activist hedge fund said in a statement Monday. No comment was immediately available from the lender, which said it would make a statement to the exchange.

Elliott seeks a ruling that board resolutions connected with the lender’s placement of new shares to Japan’s Sumitomo Mitsui Banking Corp, completed in March last year, were “passed for an improper purpose.” The fund also asks the court to release Sumitomo Mitsui Banking and Criteria Caixa SA -- the parent of Spain’s CaixaBank -- from any undertakings that restrict them from boosting or cutting their stakes.

The latest legal missive steps up the spat between Elliott and the Li family. Elliott has called for BEA to explore a sale of itself, and has voiced concerns over items to be voted on at the annual meeting, including Li’s re-election and his board’s mandate to sell shares.

Elliott’s opposition to the general mandate stems from five share sales by BEA since 2007 that have made friendly shareholders Sumitomo Mitsui Banking and Criteria Caixa the lender’s largest investors, insulating Li from activists’ demands. The investors and the Li family own a combined 45 percent of BEA’s voting shares, according to the filing. Elliott owns about 7.1 percent of the ordinary shares, the filing shows.

Elliott initiated its purchase of BEA on Jan. 14, 2015, when the bank’s shares closed at HK$30.85. The shares have gained 2.8 percent since then, outperforming the 17 percent loss in the Hang Seng Finance Index in the same time period.

Singer’s Elliott, which manages more than $28 billion in assets, has been embroiled in bitter disputes before. Earlier this year, the hedge fund prevailed against Argentina in an accord that calls for the country, which defaulted on sovereign bonds, to pay $4.65 billion in cash to Elliott and other funds.

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