Taiwanese Apple supplier battles activists over $4 billion in cash

A Taiwan-based Apple supplier is battling an international investor over its multibillion-dollar cash in a case that signals booming shareholder activism in the territory.

Catcher Technology, which makes electronics enclosures for Apple devices made in China, is being challenged by Hong Kong-based investment firm Argyle Street Management to improve its governance and return some of its $4.2 billion. dollars of net cash to shareholders, according to people familiar with the discussions.

Argyle owns about 1% of Catcher’s shares and is one of its many foreign institutional shareholders alongside Franklin Templeton, Singapore’s GIC and Cathay Life Insurance. He approached Catcher executives about his concerns during a meeting in Taiwan, one of the people said.

Shareholder activism has grown more slowly in Asia than in the United States due to the dominance of family businesses, but recent high-profile battles, including in Hong Kong over HSBC and Bank of East Asia, and in Japan over Toshiba, have raised its profile. .

Global investor appetite for Taiwan has grown in recent years, with foreign direct investment rising 275% to a 15-year high of $8 billion in the first half of 2022 due to the country’s large industrial base and of its status as a gateway to China.

However, the island’s tech-dependent stock market took a hit following a sell-off by global funds and fears of a recession in the United States.

Argyle accused Catcher’s management of “hoarding money” and using it to support a “bloated” executive structure, according to two people with knowledge of the situation. The company has a market capitalization of around $4 billion on the Taiwan Stock Exchange and is run by three brothers from the Hung family who serve on its board of directors.

In 2020, Catcher sold two units of its China division that supplied Apple with iPhone cases for $1.43 billion to smaller competitor Lens Technology, based in the mainland province of Hunan. The divestiture of one of its key revenue generators came as Chinese companies sought new opportunities to access Apple’s coveted supply chain in the wake of the Sino-US trade war.

Argyle argues that, despite the divestiture, Catcher has paid a “low” dividend of NT$10 to NT$12 per share over the past five years, which totaled NT$42.95 billion ($1.43 billion). dollars) and said it would maintain that level of dividend for the next one. three years.

About 15% of shares in the Tainan-based company are owned by the Hung family, including its chairman Allen Hung, and about 43% owned by foreign institutions.

Catcher said he is “currently in the transformation stage of the business” and diversifying into areas such as auto parts manufacturing and medical technology.

“The cash position we have retained is primarily for investment opportunities,” the company said. “We pay out at least 50% of profits as cash dividends. The cash dividends we have paid each year for the past five years are literally equal to our paid-up capital, essentially above the market average.

In July, prosecutors in Taiwan charged 14 people, including members of Catcher’s research and development team, with breach of trust and misappropriation of trade secrets for use overseas. Catcher said in a statement at the time that he is “cooperating with the investigation and following legal proceedings and judgments.”

Taiwan has stepped up efforts in recent years to prevent the leak of sensitive technologies, such as semiconductors, to the mainland. In 2021, Taipei decided to prevent domestic technology companies from selling assets or subsidiaries to Chinese companies.

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