Bank of East Asia Drops Most in Six Weeks as Li Re-Elected

  • Shareholders vote to renew board mandate to sell shares
  • Elliott has called for BEA to explore sale of itself

Bank of East Asia Ltd., the Hong Kong lender targeted by Elliott Management Corp., declined the most in more than six weeks after investors voted to re-elect Chairman David Li as a director and renewed his board’s mandate to sell shares.

The shares dropped 2.1 percent as of 1:31 p.m. local time on Monday, after falling as much as 4.1 percent earlier, the biggest intraday loss since Feb. 24. Billionaire Paul Singer’s Elliott may have suffered a setback in its attempts to weaken the Li family’s hold over BEA at the lender’s annual shareholder meeting on Friday.

The spat between Elliott and the Li family has escalated in recent months as the New York-based firm accused Li and his board of mismanagement and improperly representing shareholder interests. Elliott has called for BEA to explore a sale of itself, and last month voiced concerns over items to be voted on at the annual meeting, including Li’s re-election and a general mandate empowering the lender’s board to sell shares.

“Investors are not expecting a sale of the bank in the near term after all the resolutions were passed,” said Edmond Law, a Hong Kong-based analyst with UOB-Kay Hian Holdings Ltd. “They don’t see any external factor that will force the bank to sell itself. There won’t be any major changes no matter what Elliott says.”

Elliott’s opposition to the general mandate stems from five share sales by BEA since 2007 that have made friendly shareholders Sumitomo Mitsui Banking Corp. and Criteria Caixa SA the Hong Kong lender’s largest investors, insulating Li from activists’ demands. The two banks and the Li family own at least 44 percent of BEA, representing a voting hurdle for Elliott, which holds 7 percent of the lender’s stock.

The resolution on David Li’s re-election as a director won 71 percent of the shareholder vote on Friday, with the remainder voting against it. The resolution on the share-sale mandate was passed with a similar margin.

The margins indicate that, excluding BEA’s directors, CaixaBank and SMBC, more than 60 percent of the remaining shareholders voted against both resolutions, Elliott said in an e-mailed statement on Friday.

“The current board clearly has no mandate from the company’s independent shareholders,” the hedge-fund firm said. “The AGM voting results therefore serve only to heighten our concerns about management entrenchment.”

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