The five-year-long legal feud between the Bank of East Asia and its shareholder Elliott Management has been put on hold after the family-run lender announced that it has agreed to a comprehensive review of its portfolio of assets. The asset review is expected to result in a number of disposals with the goal of increasing the efficiency of the company's business.
According to its stock exchange filing on Wednesday, the 101-year old company has apparently tapped US investment bank Goldman Sachs to conduct the review and identify other strategic transactions. The company hopes the move would increase the value of its businesses through the shedding of noncore and underperforming assets. The Bank of East Asia announced that it will be publishing an update on Goldman Sachs' findings on June 30.
The decision to conduct an asset review received the support of one of the bank's shareholders, US hedge fund and activist investor Elliott Management. In support of the move, Elliott Management announced that it has applied for a stay in court proceedings for the suit it had filed against the bank and a number of its executives back in 2015.
Elliott Management and the Bank of East Asia were scheduled to appear in a court hearing in May. The decision to put a temporary halt to the legal battle is a big breakthrough for the long-running dispute. Analysts predict that the development could lead to an eventual restructuring of the bank, especially after David Li Kwok-po had stepped down from his chairman position in July last year and was replaced by his sons Adrian Li Man-kiu and Brian Li Man-bun.
The brothers, who have now taken over leadership of the Hong Kong-based bank mentioned in a statement that the asset review was an important initiative as it would result in the enhancement of the company's capital efficiency. The review itself comes just weeks after the bank announced that it was considering a massive reorganization plan for its mainland business following a massive earnings loss in 2019.
Analysts predict that the bank will likely be disposing of some of its mainland assets, including a number of its joint ventures and minority stakes in underperforming companies. The bank is expected to then shift the proceeds of the asset liquidation to better-performing assets. It is also apparently very unlikely that the bank will sell off its core banking businesses in the mainland and Hong Kong.
The Bank of East Asia currently owns a number of non-banking investments in various industries such as real estate, hospitality, and insurance. The largest among its nonbank assets include an HK$2 million in Aberdeen Restaurant Enterprises, its two wholly-owned insurance subsidiaries, its major stakes in Brilliance-BEA Auto Finance, and its 25 percent stake in Million Fortune Development.
