DGAP-News: Octavian Advisors: Octavian addresses inaccurate claims of Balda AG
(firmenpresse) - DGAP-News: Octavian Advisors / Key word(s): Legal Matter/AGM/EGM
Octavian Advisors: Octavian addresses inaccurate claims of Balda AG
05.01.2012 / 10:00
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Press Release
OCTAVIAN ADDRESSES INACCURATE CLAIMS BY BALDA AG
Calls New Appointment of Balda's CEO an Attempt by the Supervisory Board to
Take Irreversible Action Ahead of Upcoming Shareholders' Vote
NEW YORK - January 5, 2012 - Octavian Advisors LP ('Octavian'), which
through various funds owns approximately 8.3% of the outstanding shares of
Balda AG ('Balda'), issued the following response to the inaccurate
allegations by Balda's Supervisory Board in its press release on December
29, 2011.
'Balda's Supervisory Board has made a series of inaccurate allegations
designed to obfuscate the fundamental point that the current members of the
Board have in our view repeatedly failed to act in the best interest of the
company and its shareholders,' said Richard Hurowitz, Chairman and Chief
Executive Officer of Octavian. 'The Supervisory Board's apparent conflict
of interest has cost Balda's shareholders EUR350 million to date. In
addition, the resignation of the company's Chief Executive Officer and his
replacement by two new members at this point in time is another display of
abysmal corporate governance. The fact that the CEO felt impelled to resign
demonstrated in our view that the current Supervisory Board will continue
to inappropriately interfere with management to the detriment of Balda and
its shareholders.'
Igor Kuzniar, a Managing Director at Octavian, said, 'It is clearly time
for an improvement of corporate governance at Balda. Despite its distorted
claims that the interests of Michael Chiang and his wife Yun-Ling Chiang
are somehow separate and not aligned, the Supervisory Board of Balda
apparently continues to focus on protecting the interests of the Chiang
family rather than upholding its fiduciary duty to the company's
shareholders. The exchange of the Board of Management roughly one month
before the Extraordinary General Meeting can only be interpreted as an
attempt to take irreversible action ahead of the upcoming shareholders'
vote. We caution the members of the Supervisory Board not to participate
in any additional actions that may result in further harm to Balda's
shareholders and we are committed to using all legal means available to us
to ensure that the Supervisory Board and new Board of Management are held
accountable for any breach of their fiduciary duties.'
Octavian today sent the following letter to Balda's Supervisory Board:
January 5, 2012
Dr. Michael Naschke
Chairman of the Supervisory Board
Balda Aktiengesellschaft
Bergkirchener Str. 228
32549 Bad Oeynhausen
Germany
Dear Dr. Naschke:
We are writing to respond to the press release the Supervisory Board of
Balda AG ('Balda') issued on December 29, 2011 that included a series of
inaccurate allegations about Octavian Advisors, LP ('Octavian') and our
desire to elect three independent directors to the Supervisory Board of
Balda at the company's Extraordinary General Meeting on February 8, 2012.
Unfortunately, the statements in the Supervisory Board's press release
distort the facts and present an incomplete picture of the state of affairs
at Balda. We would like to respond to each of these in turn.
1. '.the Supervisory Board is still astonished about how Octavian could
get hold of these Company's secrets that now have been published in a
way that may be disadvantageous to the Company and, consequently, to
all of its shareholders.'
We want to make clear that neither Octavian nor any of its affiliates or
directors or officers have received or used any confidential or sensitive
company information whatsoever. Our claims and allegations are solely based
on or derived from publicly available information, in particular the
publications made by Balda and its management and the information that was
presented in shareholders' meetings.
2. 'Octavian's further allegations that two of the three members of the
Company's Supervisory Board were not independent or were subject to
conflict of interests.are based on the wrong assumption that Mr.
Michael Chiang was the major shareholder of the Company. However, as
is well known by the public notifications of voting rights held in the
Company and that the Company's major shareholder, Yield Return
Investments Limited, is solely owned by Mrs. Yun-Ling Chiang.'
It is our strong belief that circumstances indicate that Balda's
Supervisory Board has clearly acted in favor of Michael Chiang, his wife
Mrs. Yun-Ling Chiang and other investors in TPK Holding Co., Ltd ('TPK'),
rather than in the best interest of Balda and all its shareholders.
We have reason to believe that two of the three members of the Supervisory
Board, Mr. Yu-Sheng Kai and Mr. Chun-Chen Chen, are closely related to
Balda's biggest single shareholder, Mr. Chiang, as both are - to our
knowledge - active in companies that are part of Mr. Chiang's group and
were nominated by Yield Return Investments Limited, an investment firm that
to our knowledge in reality is run by both Mr. and Mrs. Chiang. Balda's
assertion that neither Mr. Chen nor Mr. Kai are employees of TPK is
formalistic and misleading, if not downright wrong. For instance, as of
May 31 2011, Mr. Chen has been listed as a Board member of Taiwan Video and
Monitor Corporation, a company clearly 'related in substance' to TPK
according to TPK's 2010 annual report and thus a part of Mr. Chiang's
group. We also have indications that Mr. Kai is similarly involved in
companies related to TPK or Mr. Chiang.
Similarly, Balda's assertion that Yield Return Investments is controlled by
Mrs. Chiang and thus there is no direct relation to Mr. Chiang is
formalistic and misleading and nothing more than another attempt to distort
the truth and maintain the status quo.
On February 20, 2009, Balda issued a press release stating that Max Gain
Management Ltd. ('Max') had acquired a 29.9% stake in Balda and that Max
was controlled by Mr. Chiang. In this press release, Balda expressly
welcomed Mr. Chiang as the company's new controlling shareholder. Also, in
a publication in January 2010 pursuant to section 26 of the German
Securities Trading Act, Balda stated that Max had transferred its
shareholding to Yield Return Investments Limited. Balda pointed out that
this was an exclusive Group-based transfer within the Chiang family and
that the members of the Chiang family that were behind Yield Return
Investments Limited were also the same ones that had indirect control of
Max. The Company further elaborated that the transfer therefore had no
effect on the existing percentage ownership of the Chiang family in Balda.
This official company information is clearly contradictory to the
statements made by Balda's Supervisory Board on December 29, 2011.
The Chiang family now holds a 27.6% stake in Balda worth approximately
EUR50 million through Yield Return Investment. The conflict of interest
arises as Mr. Chiang is also co-founder and Chairman of TPK, in which he
and Mrs. Chiang hold a 25% stake worth approximately EUR500 million. As a
remnant of an earlier joint venture, Balda in turn holds a 16.1% stake in
TPK. At current market levels, this 16.1% stake alone is worth
approximately 1.5 times Balda's market capitalisation.
It is apparent that several decisions made by the SupervisoryBoard have
been to the detriment of Balda and its general shareholders, with the
exception of Mr. and Mrs. Chiang and TPK, who have benefited from them.
3. 'The Supervisory Board of the Company understands that shareholders may
doubt the Company's decision not to sell its shareholding in the touch
screen producer TPK Holding Co., Ltd. ('TPK') at a time when the stock
exchange was favourable for such transaction. However, the better
reasons argued for a refusal of the requested approvals in each of the
respective cases.'
The Supervisory Board's failure to approve the disposal of Balda's stake in
TPK appears to be another example of its conflict of interest and we
seriously question its judgment on this issue. By failing to approve such
a sale when the TPK shares were worth more than three times Balda's current
market capitalization, we believe the Supervisory Board protected the
interests of the Chiang family while depriving Balda shareholders of EUR350
million in value after a subsequent decline in the value of TPK shares.
4. '.the Company as a major shareholder of TPK (owning 16.1% of TPK or
around 37.8 million TPK shares) cannot dump TPK shares into the stock
market recklessly to destroy the stability of TPK stock price and,
hence, the value of its remaining TPK shares held.'
This statement is inaccurate for several reasons. First, all Balda shares
for which the lock-up had expired could have been placed simultaneously in
one or several off-market transactions managed by any of the top investment
banks active in Asia. There was never a need to 'dump' the shares on the
market and thus the sale would not have directly affected the share price
of TPK.
On the contrary, it is quite clear, and can be buttressed with numerous
comments by sell-side analysts who follow TPK, that the inaction of the
Supervisory Board itself has been a chief contributor to the weakness of
the TPK shares. As more and more market participants positioned themselves
for a sale of TPK stock which never came, they helped drive down the share
price of TPK. Had the Supervisory Board acted swiftly and with conviction,
rather than allowing damaging rumours take hold over more than six months,
the perceived overhang would likely have been removed at once and much of
the decline in TPK's share price could possibly have been avoided.
Finally, the Supervisory Board fails to specify what conditions exactly it
was waiting for that were not in place when TPK's stock was at 800
Taiwanese Dollar ('TWD') and above. According to its logic that it didn't
sell the shares because it feared that the TPK share price would be
affected, the TPK shares might never be sold, as one can always argue that
risk exists to some extent.
5. 'In addition, the securities laws of Taiwan require the Company, before
selling or buying, to file with Taiwan authorities for change of its
shareholding in TPK for more than 10,000 TPK shares, as by operation of
law, the Company is deemed to be an insider.'
To say that the TPK shares were not sold because regulatory filings in
Taiwan were not in place is in our view simply another excuse. Following
the Supervisory Board's logic, the disposal of larger shareholdings by
deemed insiders in listed Taiwanese companies would be impossible and
Taiwanese shares unmarketable.
6. '.it should be mentioned that Mr. Chiang helped out the Company in 2008
by paying a price for the TPK shares (that had not been listed at that
time).'
In October 2008, Balda sold a 12% stake in TPK to Michael Chiang. While
the exact terms were not disclosed, it appears that the shares were sold
for not more than 20 TWD per share. When TPK went public two years later,
the offer price was at TWD 220 and the shares closed at TWD 480 on the
first day of trading and hence at a significantly higher price than the
price paid by Mr. Chiang. In light of these facts, it is Octavian's belief
that Mr. Chiang's transactions were not merely altruistic but rather
commercially extremely remunerative for the Chiang family.7. 'The Supervisory Board of the Company fears the elections of the
candidates proposed by Octavian would lead to severe conflicts of
interests and would strongly deteriorate the Company's corporate
governance.'
Octavian is seeking to replace the current members of Balda's Supervisory
Board at an Extraordinary General Meeting because we believe the current
Board has failed to represent the best interests of Balda's shareholders.
Its failure, in our opinion, has led to a significant deterioration in
shareholder value which must be immediately addressed through change at the
Board level. We firmly believe a reconstituted Board that is free from
conflicts of interests is vital to the Company's future success.
Octavian is therefore seeking to elect three independent and experienced
directors who can evaluate the opportunities and challenges at Balda with
an open mind and a fresh perspective, render neutral and unbiased advice to
the Management Board in the interest of all shareholders and ensure
accountability at the Board level. Our nominees - RenéCharles Jäggi,
Behdad Alizadeh and Igor Kuzniar - possess the fortitude, skillsets, and
experience to maximize value for all Balda shareholders.
Neither RenéCharles Jäggi nor Behdad Alizadeh has conflicting business
interests or business relations with the Company in excess of their
intended Board membership. The same applies to Igor Kuzniar, who would be
the Board representative for a major shareholder in the company, which
would not be unusual and, in the absence of further business relationships,
makes his interests parallel to those of all other Balda shareholders.
In addition, Octavian is deeply concerned that the current Supervisory
Board members are not in a position to duly fulfil their duties given the
significant misunderstandings regarding the legal requirements for
Supervisory Board members in listed companies and the respective
recommendations of the German Corporate Governance Code referred to in the
Supervisory Board's statement of December 29, 2011. In particular, the
number of board positions held by Mr. Jäggi would not hinder a due
fulfilment of the duties of a Supervisory Board member of Balda. The Board
memberships of Mr. Jäggi are neither in contradiction to German law nor the
German Corporate Governance Code. The statement by the Supervisory Board
that his election could be declared null and void by a court is thus
without any legal substance.
We are willing and prepared to seek an open dialogue with the Company, its
management and stakeholders in order to act in the best interest of Balda.
However, we are extremely disappointed that, before this dialogue could
take place, Balda's Supervisory Board has resorted to scurrilous
allegations and obvious fabrications in order to try to protect its
position at the expense of the true owners of Balda, its shareholders.
Furthermore, the exchange of Rainer Mohr and the Board of Management
roughly one month before the Extraordinary General Meeting can only be
interpreted as an attempt to take irreversible action ahead of the upcoming
shareholders' vote. We caution the members of the Supervisory Board not to
participate in any additional actions that may result in further harm to
Balda's shareholders and we are committed to using all legal means
available to us to ensure that the Supervisory Board and new Board of
Management are held accountable for any breach of their fiduciary duties.
Sincerely,
Richard Hurowitz
Chief Executive Officer
Octavian Advisors, LP
cc: Supervisory Board
* * *
Additional information regarding Octavian's proposed course of action and
recommended nominees is available at www.ShareholdersForBalda.com.
About Octavian Advisors
Octavian Advisors, LP is a global investment firm with offices in New York
and London. The firm focuses on special situations and distressed
investments in international markets, and has successfully invested in over
40 countries on six continents. Octavian currently manages approximately $1
billion for leading endowments, foundations, pension funds, family offices
and institutions.
Contacts:
For German media
CNC - Communications&Network Consulting
Lasse SchmidT +49 89 599 458 142E Nicholas WenzelT +89 599 458 115EFor International media
Lasse.Schmid(at)cnc-communications.com Nicholas.Wenzel(at)cnc-
communications.com
Sard Verbinnen&Co
Jonathan Doorley
T +1 212.687.8080
E JDoorley(at)sardverb.com
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