A Taiwanese-based Apple supplier is in a legal battle with a foreign investor over its multibillion-dollar cash hoard, a development that indicates a rise in shareholder activism in the country.
According to people involved with the conversations, Hong Kong-based investment firm Argyle Street Management is pressing Chinese company Catcher Technology, which makes electronic cases for Apple products, to enhance its governance and give up some of its $4.2 billion in net cash to shareholders.
Along with Franklin Templeton, Singapore’s GIC, and Cathay Life Insurance, Argyle is one of a number of Catcher’s overseas institutional shareholders and holds around 1% of the company’s shares. One of the persons stated that it spoke with Catcher executives about its worries during a meeting in Taiwan.
Due to the prevalence of family-controlled businesses, shareholder activism has developed more slowly in Asia than in the US, although recent high-profile conflicts, such as those between HSBC and Bank of East Asia in Hong Kong and Toshiba in Japan, have increased its visibility.
The substantial industrial base of Taiwan and its position as a gateway to China have raised the interest of international investors in the country in recent years, with foreign direct investment jumping by 275% to a 15-year high of $8 billion in the first half of 2022.
Thoughts of a US recession and a sell-off by international funds hurt the island’s tech-dependent stock market.
According to two people with knowledge of the situation, Argyle has accused Catcher’s management of “hoarding funds” and using it to support a “bloated” executive structure. The company is governed by three brothers from the Hung family who sit on its board and has a market value of roughly $4 billion on Taiwan’s stock exchange.
In 2020, a smaller rival, Lens Technology, based in the Chinese region of Hunan, purchased two units from Catcher’s Chinese branch that provided Apple with iPhone shells for $1.43 billion. Following the China-US trade war, Chinese companies competed for fresh opportunities to gain access to Apple’s valued supply chain, prompting the company to sell off one of its key sources of income.
Argyle claims that despite the disposal, Catcher has paid a “modest” dividend of NT$10–NT$12 per share for the previous five years, amounting to NT$42.95 billion ($1.43 billion), and has stated it will keep paying that dividend level for the following three years.
The Hung family, which includes the company’s chairman Allen Hung, owns about 15% of the company’s shares, while foreign institutions possess about 43%.
It is diversifying into industries like the production of automotive parts and medical technologies, according to Catcher, who said that it is “now in the stage of business transition.”
The corporation stated that “the cash position we retained is primarily for investment prospects.” “We pay cash dividends on at least 50% of our earnings. Over the previous five years, we have given cash dividends each year that are precisely equal to our paid-in capital, which is effectively above market average.
14 employees, including members of Catcher‘s research and development team, were accused in July by Taiwanese authorities with breach of trust and taking trade secrets for use abroad. Catcher stated that it “cooperates with the inquiry and honors judicial procedures and rulings” in a statement at the time.
In recent years, Taiwan has increased its attempts to stop vital technologies, such semiconductors, from reaching the mainland. To prevent domestic IT companies from selling assets or subsidiaries to Chinese corporations, Taipei took action in 2021.