Reuters: Money: 'Clerical error' foiled hedge fund Octavian's Balda battle

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'Clerical error' foiled hedge fund Octavian's Balda battle Mar 12th 2012, 07:37 By Nishant Kumar HONG KONG | Mon Mar 12, 2012 3:37am EDT HONG KONG (Reuters) - Octavian Advisors LP said a clerical error prevented the $1 billion New York-based hedge fund from backing its own move last month to oust the supervisory board of German medical and electronics products maker Balda AG. Octavian's failure to vote its block of shares in its own resolution dealt a blow to the hedge fund's bid to force Balda to sell its stake in Taiwan's TPK Holding, a maker of touch screens for Apple Inc. Octavian, which made a foray into shareholder activism late last year, believes Balda should sell its 16.1 percent stake in TPK as it's a non-core business. But, standing in the way of Octavian's effort is Michael Chiang, Balda's top shareholder. Chiang also owns about 25 percent of TPK. Octavian has accused Chiang of conflict of interest, citing his stakes in both companies. The hedge fund has argued that Balda's current supervisory board protects the interests of Chiang and his 27.6 percent stake in the German company. That was the crux of the extraordinary general meeting (EGM) that was called to address Octavian's proxy battle, which ultimately fell short of votes. "There was apparently a clerical error at the Extraordinary General Meeting chaired by Mr. Naschke (Balda's Chairman)," said an Octavian spokesman in an emailed response to a question asking why Octavian failed to vote its largest block of shares when the resolution was presented. "That does not change the fact, however, that Octavian's proposal received overwhelming support from shareholders who are not affiliated with Michael Chiang," the spokesman added. Octavian owned about 8.3 percent of the outstanding shares of Balda through various funds, it had said in February. Balda's shares plunged about 37 percent last year but have gained 44 percent so far in 2012. PROXY FIGHT Balda counts Chicago-based hedge fund RoundKeep Capital Advisors LLC, Octavian and Hong Kong-based event-driven hedge fund Senrigan Capital among its top-5 shareholders. Richard Hurowitz, chairman and chief executive officer of Octavian, has said Balda's TPK stake should have been sold, arguing that delays have cost Balda shareholders 350 million euros. Octavian launched a proxy fight against Balda late last year and made the company call the EGM on February 8 to take up a resolution that sought to dismiss the German firm's three incumbent supervisory board members and install candidates favored by the hedge fund. To vote for Octavian's resolutions, shareholders needed to fill in voting cards and hand them in, a Balda shareholder told Reuters on condition of anonymity. However, he said, the key block of Octavian's shares was not handed in because either it had not been filled in or had been misplaced. Balda declined to comment and said the vote "confirmed the members of the board in their office with a clear majority." It also denied any technical mistakes with regard to the exercise of votes or the counting of the votes. When asked what the clerical error was, Octavian declined to elaborate. According to research notes from First Berlin and Berenberg Bank, cited in a presentation of Octavian, the hedge fund's nomination stood a good chance of succeeding. In a February 8 statement, Balda said 76.9 percent of the share capital of the company was present during the motion and Octavian's nomination did not receive the required approval of more than 50 percent of the votes. 'CONFLICT OF INTEREST' The main contentious issue between Octavian and Balda emerged after a September announcement by the company to partially sell TPK shares. JP Morgan Securities and Nomura International (Hong Kong) launched a block trade but Balda halted the sale in November. Rainer Mohr, who was then chief executive officer of Balda, said the company will monetize its TPK stake when it believed the shares were fairly valued. A month later, Balda said Mohr was stepping down due to "differing views regarding strategy". Balda said on March 1 that it had appointed a law firm to probe whether board members had acted in line with their fiduciary duties in the attempts in 2011 to sell TPK shares and whether Balda had suffered any damages. The German company also said last month that it had agreed to sell 20 million shares in TPK and expected to raise about 238 million euros. Octavian said in the email that was a first step towards unlocking value for the company, but was not enough. "Octavian remains deeply concerned about the serious corporate governance issues at Balda and will continue to carefully analyze the situation and take all steps necessary to protect our investment," it said in the email to Reuters. (Editing by Michael Flaherty and Muralikumar Anantharaman) Link this Share this Digg this Email Reprints

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