There may be more to an American hedge fund’s successful bid to scupper a new share issue by eSun Holdings than mere scepticism over the prospects of Macau’s gaming industry.
Hong Kong-listed eSun, a conglomerate with interests including film production and music publishing, is one of the partners in the Macao Studio City Project.
It also appears to be the target of an assertive campaign by one of its institutional shareholders, California hedge fund Passport Capital, which is unhappy with eSun’s own performance.
Macao Studio City, which would feature among other attractions a 4,000-seat arena for concerts by eSun-managed Cantopop talent, has already been put back until at least 2011 because of funding issues.
Late last year eSun announced plans to raise HKD177 million (USD22.9 million) from a new share issue. It is not clear whether any of that new cash was destined for the USD2.4 billion Macao Studio City project. In any event, the share issue was opposed by two funds belonging to Passport Capital that alleged eSun was acting in breach of its fiduciary duty. In late December, Passport won an injunction against the share issue in Hong Kong’s Court of First Instance.
Now it has emerged that Passport has spent more than HKD400 million accumulating 28 percent of eSun Holdings. This is only 8 percent short of the stake held by the company’s founders the Lam family.
At the heart of the matter, according to the South China Morning Post, is Passport’s dissatisfaction at eSun’s performance and a feeling there is plenty of value in the company still to be unlocked for shareholders.
Whether Passport wishes to ‘unlock’ that value by creating a bidding war for existing eSun shares, by liquidating assets or by taking an active role in running a going concern (or by using a combination of these strategies) isn’t yet known.
The SCMP points out that eSun is a tempting target, with HKD5.9 billion of net asset value, market capitalisation of HKD1.4 billion and HKD1.8 billion in cash, plus a 36 percent stake in the Hong Kong property company Lai Sun Development.
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