Bank of East Asia rejects sale call from hedge fund Elliott

Bank of East Asia says that with its "business initiatives that are under way, now is a poor time to contemplate a sale".
Bank of East Asia says that with its "business initiatives that are under way, now is a poor time to contemplate a sale". PHOTO: BLOOMBERG

HONG KONG • Bank of East Asia (BEA), the Hong Kong lender targeted by billionaire Paul Singer's Elliott Management Corp, has rejected a call by the hedge fund to consider selling itself even after posting a bigger-than-expected profit drop.

Instead, the bank intends to focus on improving what it already has, according to a BEA statement filed with the Hong Kong Stock Exchange yesterday. That includes its China operations, which the lender said are "severely challenged" in a separate statement that outlined a 17 per cent decline in full-year profit, higher bad loans on the mainland and a hiring freeze.

"Given the current challenging macroeconomic and operating environment as well as the business initiatives that are under way, now is a poor time to contemplate a sale," it said. "The bank will not be conducting an auction process."

In a letter to fellow shareholders earlier this month, Elliott urged BEA to explore a sale of the company "at an appropriate premium".

Previous bids for Hong Kong banks have been priced at an average of two times book value, which for BEA would equal about HK$60 a share, according to the hedge fund, which holds a 7 per cent stake in the lender.

BEA stock has slumped 23 per cent in the past six months. It ended the day yesterday at HK$23.10 in Hong Kong.

A Hong Kong-based spokesman for Elliott did not immediately respond to requests for a comment. In its letter earlier this month, the firm said BEA should now focus on delivering "proper value" for stockholders after blaming an "entrenched executive management" for mismanaging the business.

"With Elliot pushing BEA to sell itself, well, good luck with that," said Mr Andrew Clarke, Hong Kong-based director of trading at Mirabaud Asia.

"Even if a buyer was remotely interested, in the current environment, two-times book is very punchy."

BEA's 17 per cent decline in 2015 profit to HK$5.52 billion (S$995 million) missed the HK$6.03 billion average estimate of three analysts surveyed by Bloomberg.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on February 16, 2016, with the headline 'Bank of East Asia rejects sale call from hedge fund Elliott'. Print Edition | Subscribe