Hedge fund Elliott Advisors’ case against Bank of East Asia comes to court
Hong Kong-based lender is accused of “unfair prejudice” in two share placements
US hedge fund Elliott Advisors launched court proceedings against Bank of East Asia on Wednesday, accusing the bank and its directors of “unfairly prejudicing” shareholders when it placed shares in two separate deals with Japan’s Sumitomo and Spain’s CaixaBank in March 2015 and January this year.
The fund wants key clauses from the agreements annulled, and asked Hong Kong’s High Court to rule that the bank may not enter into similar agreements in the future without court approval.
If the petition is successful, the court would order BEA to release CaixaBank and Sumitomo from contractual arrangements that prevent their stakes in the Hong Kong bank from being reduced or increased from their current level of 17.2 per cent each without the bank’s approval, potentially paving the way for a takeover.
BEA has said the clauses were put in place to prevent disorderly selling down of the bank’s shares. Meanwhile, the bank’s majority shareholders have expressed support for the bank’s management and are not seeking such a sale.
Last year, a court forced BEA to make disclosures of its internal agreements and communications to Elliott, information the hedge fund is now building its case around.
BEA’s barrister Bernard Man suggested to the court that Elliott’s legal representatives are “obsessed” by the discovery process, whereby each party in a civil case request information or evidence from the other.
“This is not your usual unfair prejudice application,” said Man. “One has to carefully consider whether there should be certain parts struck out. I don’t know what the disputes are and what evidence will be posed in court.”
