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THE privatisation of East Asiatic Co (Hong Kong) (EAC) hit a wall yesterday as minority shareholders, including some fund managers, voted overwhelmingly against it.

  In voting strongly with their feet on the issue, minority shareholders went against the expectations of company management.

  Managing director Bjarne Uhde Nielsen said he was disappointed with the defeat.

  Reasons for the privatisation included a pessimistic forecast for company earnings and difficulties in raising funds.

  The shareholders declined an offer from the company to buy the shares back at $1.20 per share.

  The Templeton fund group repeatedly rejected the offer, demanding $1.90 a share.

  A key question now is whether or not the parent company will continue to support the Hong Kong arm.

  Parent firm East Asiatic Co A/S, the Denmark-based trading hong, had proposed to buy back the minority interest of EAC through the controlling shareholder, East Asiatic Co (Hong Kong) Holdings, which owns 300 million shares.

  Mark Mobius, president of Templeton Emerging Markets Fund, commenting on the voting results from Singapore, said: 'I'm guardedly optimistic.

  'It's possible they may be angry that they're beaten.'   He said the worst scenario would be for the Hong Kong company be left 'to die'.

  Mr Nielsen said company officials had not given any thought as to how to move forward and did not know the capital needs for a China expansion.

  He said there were no other plans in place for fund-raising, through either a rights issue or share sale, both of which Templeton recommended.

  Templeton believed the losses forecast was only an excuse for privatisation.

   Templeteon brought up the case of a shareholder who said he was now worried that the parent company would try to withdraw distribution rights from the Hong Kong company for products such as Mars confectionery and Lego toys.

  The parent company had said low liquidity of the stock made it difficult to raise funds for future commitments.

  In the offer document, the parent company said it might carry out 'opportunities' through 'one of its other entities'.

  Mr Nielsen denied the defeat had been an embarrassment.

  The court-ordered meeting for minority shareholders required holders of 90 per cent of the 100 million shares to approve the privatisation before it could go ahead.

  The holders of 39 million shares voted against the proposal, with 29 million represented by the Templeton group alone.

  Representatives of five million shares voted for privatisation.

  Mr Nielsen said: 'Embarrassing, I'd definitely not say. Whenever you make a carefully well-documented proposal, which based on normal practices is deemed as a very acceptable price, then there is no reason to be embarrassed.

  'But misjudgment is clearly if you make a proposal and it's voted down. Then it has gone against your expectation. 'I think . . . shareholders are prepared to take a longer-term view than we've expected, because [the company] is a China player.' 



EAC buy-out offer rejected