Primus sues Eon to block bank takeover
Hong Kong-based private equity house Primus Pacific Partners is suing nine directors of Eon Capital, a Malaysian bank in which Primus owns 20 per cent, in an attempt to block a takeover of the lender that will cause it to lose money on its investment.
In a trial that begins in Kuala Lumpur today, Primus plans to say Eon's management board had agreed to sell the company at a price Primus argues undervalues the business, according to documents filed with the court.
In its legal petition, Primus accuses the first and second defendants in the suit, Eon Capital majority shareholder Rin Kei Mei, a Malaysian businessman in his 70s, and Tiong Ik King, the brother of Sarawak timber billionaire Tiong Hiew King, of encouraging what it alleges is a low offer for Eon Capital because they wanted to sell out.
All of Eon's directors declined to comment on the case.
Rin and the Tiong family hold 33 per cent of the bank's shares between them, according to a circular Eon Capital released on September 1.
Eon's board agreed to sell the bank for M$7.30 a share to another Malaysian lender, Hong Leong Bank, in early April. The deal, which has not yet been voted on by shareholders, valued Eon, the country's seventh-largest lender, at M$5.1 billion (HK$12.69 billion). Hong Leong, which declined to comment, is not a defendant in the lawsuit.
Primus paid M$9.50 a share for a 20.2 per cent stake in Eon in February 2008, in a deal which then valued Eon at M$6.7 billion.
In agreeing to the takeover, Rin and Tiong Ik King, 'breached their duty of undivided loyalty to the company to serve their personal interest, and in abuse of their fiduciary positions to the company', Primus' lawsuit, reviewed by the Post, alleges.
Primus, which is headed up by former Solomon Smith Barney investment banker Ng Wing Fei and counts Qatar's and Kuwait's sovereign wealth funds among its investors, now faces making a M$323 million loss on its investment. It has asked the court to award it M$117.25 million damages, plus its legal costs.
Eon's current board of directors, other than Rin and Tiong, were all appointed on March 26 after four original board members resigned. The law suit did not specify why they resigned.
The new directors, who according to Primus' lawsuit were selected by Rin, ignored advice from the bank's financial adviser, investment bank Credit Suisse, that Hong Leong's M$7.3 a share offer for the business was not high enough.
Credit Suisse's opinion was publicised in a September 1 announcement by Eon.
In that filing the investment bank said Hong Leong, which is Malaysia's sixth biggest lender and is controlled by billionaire Qwek Leong Heng, should pay between M$8.23 and M$9.59 a share for Eon.
The saga could not come at a worse time for Primus Pacific's Ng Wing Fei, a Taiwanese national who, in the late 1990s, was a key adviser to Malaysia's government on the country's banking crisis.
There are two funds in the Primus stable, the other being Primus Financial, which is also run by Ng, alongside former Citigroup Asian investment banking chief Robert Morse. Last year Primus Financial won permission from bailed-out US insurer AIG to buy its Taiwanese division, Nanshan Life, for US$2.15 billion.
In early September, Taiwan's government blocked that deal on the grounds that Primus and its partner, Hong Kong-listed battery-maker turned bid vehicle China Strategic, lacked experience in running insurance businesses. China Strategic said in early September it was considering an appeal against that decision.
Other than Rin and Tiong, the seven Eon directors Primus Pacific is suing are Eon chairman Wee Hoe Soon, Ahmad Faisal Ibrahim, Azman Abu Bakar, Haron Siraj, Zaha Rina Zahari, Nicholas John Lough and Ahmad Riza Basir.
On behalf of all Eon's directors, Lough e-mailed the Post declining to comment on the case. A Primus spokesman declined to comment.
Value vanishing
Primus Pacific bought 20.2 per cent of Eon Capital at an agreed price, in Malaysian ringgit per share, of: $9.5
Eon now wants to sell out to Hong Leong at lower than its financial advisers' recommended price, at, in per share: $7.3