Hong Kong investor files court injunction on NEC’s JAE stake sale

HONG Kong-based hedge fund Oasis Management has filed an injunction to block NEC’s sale of its stake in its listed unit Japan Aviation Electronics (JAE), saying the sale would inflict damage on its shareholders.

The injunction request, filed with the Tokyo District Court on Feb 20 and seen by Reuters on Monday (Feb 26), said Oasis believes that the NEC board of directors ignored an opportunity to sell JAE shares at a higher price, in breach of their fiduciary duty owed to shareholders.

The Oasis statement was referring to reports that NEC had received multiple buyout offers from global private equity funds for JAE before agreeing to tender much of its 51 per cent stake at a discount.

At least three global funds have indicated to both JAE and parent NEC that they were willing to pay substantial premiums to buy out the electronic components manufacturer, sources told Reuters.

JAE disclosed after the Reuters report that it had received multiple buyout offers ahead of the ongoing tender offer.

The breach of fiduciary duty by NEC’s board of directors led to direct, quantifiable losses to NEC shareholders, Oasis said, adding that it has been an NEC shareholder since 2020 with shares in excess of three million currently.

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NEC said that the company believes there is no reason for the injunction to be upheld and that it should be dismissed. NEC would respond appropriately, it added.

JAE’s tender offer, which runs from Jan 30 to Feb 28, sets the price at a 14 per cent discount to the 3,040 yen closing price prior to the announcement.

Oasis revealed in its statement to the court that it made an offer on Jan 30 to purchase NEC’s shares in JAE for 3,000 yen per share.

Similarly, Chicago-based investor Curi RMB Capital has called on NEC and JAE to cancel their buyback deal and reconsider alternative buyout offers they have received.

It plans to seek the companies’ board minutes under court permission to evaluate their decision-making process and “pursue appropriate recourse against the board on behalf of shareholders”, the fund said. REUTERS