BEA reviews assets for sale as its legal battle with Elliott Management put on hold
Bank of East Asia’s five-year legal battle with shareholder Elliott Management is on hold after the lender agreed to a review of its portfolio of assets that may lead to disposals, according to a stock exchange filing on Wednesday.
The 101-year old family-run lender said it has appointed Goldman Sachs to identify “potential strategic transactions” which would enhance the value of its businesses as well as possibly selling noncore assets. BEA will publish an update on its findings by June 30.
The review won support from its shareholder, US hedge fund Elliott Management, which will apply for a stay in court proceedings that it started in 2015 against the bank as well as former and serving directors, according to a joint statement from BEA and Elliott on Wednesday. The court hearing was scheduled for May.
This will mark a breakthrough in the lengthy legal battle between BEA and Elliott and potentially further restructuring after chairman David Li Kwok-po’s sons, Adrian Li Man-kiu and Brian Li Man-bun, took over his leadership role in July.
“Assessing the strategic fit and value of constituent assets in the bank’s portfolio is an important initiative to improve our capital efficiency and drive shareholder value,” said the Li brothers who are co-chief executives of the lender.
The review follows Bank of East Asia announcement last month that it was reorganising its mainland business after suffering a stunning loss in the world's second-largest economy. The banks 2019 earnings slumped to their lowest point since the depths of 2008 to 2009 global financial crisis.As a result of the review, BEA may dispose of minority stakes and businesses with a low margin and plough the proceeds into better performing assets, a source familiar with the situation said.
“The lender will probably dispose of some mainland joint ventures. It is unlikely it will sell out of the core banking businesses in Hong Kong or mainland China but it is more likely to be the nonbank businesses,” said Louis Tse Ming-kwong, a managing director at Hong Kong-based VC Asset Management.
BEA has a number of nonbank investments across the hospitality, insurance and property industries, according to its 2018 annual report. This includes a HK$2 million stake at Aberdeen Restaurant Enterprises which operates the iconic Jumbo Kingdom floating restaurants which closed from Tuesday until further notice due to the Covid-19 outbreak.It has two wholly-owned insurance arms called BEA Life and Blue Cross (Asia-Pacific) Insurance, a 51 per cent stake in Hong Kong fund company BEA Union Investment Management. In mainland China, it has a 22.5 per cent stakes in Brilliance-BEA Auto Finance and owns 25 per cent in property developer Million Fortune Development (Shenzhen), according to the annual report.
“Elliott supports the announcement today by BEA that it will undertake a comprehensive strategic review,” said Jonathan Pollock, co-chief executive and chief investment officer of Elliott in the joint statement with BEA. Elliott owns an 8 per cent stake in BEA.
“BEA has built a strong and valuable franchise in Hong Kong and the mainland and we believe this step will lead to significant value creation. We look forward to continuing a dialogue with management and the board about opportunities to increase shareholder value,” Pollock said.
BEA shares closed up 5.5 per cent at HK$17.6 on Wednesday in Hong Kong.
This article appeared in the South China Morning Post print edition as: Legal battle on hold as BEA reviews assets
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