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Octavian Addresses Inaccurate Claims by Balda AG

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Octavian Addresses Inaccurate Claims by Balda AG Powered By Docstoc
					Octavian Addresses Inaccurate Claims by Balda
AG
Calls New Appointment of Balda’s CEO an Attempt by the Supervisory Board to Take Irreversible
Action Ahead of Upcoming Shareholders’ Vote

January 05, 2012 07:03 AM Eastern Time 

NEW YORK--(EON: Enhanced Online News)--Octavian Advisors LP (“Octavian”), which through various funds
owns approximately 8.3% of the outstanding shares of Balda AG (“Balda”), issued the following response to the
inaccurate allegations by Balda’s Supervisory Board in its press release on December 29, 2011.

“Balda’s Supervisory Board has made a series of inaccurate allegations designed to obfuscate the fundamental point
that the current members of the Board have in our view repeatedly failed to act in the best interest of the company
and its shareholders,” said Richard Hurowitz, Chairman and Chief Executive Officer of Octavian. “The Supervisory
Board’s apparent conflict of interest has cost Balda’s shareholders €350 million to date. In addition, the resignation
of the company’s Chief Executive Officer and his replacement by two new members at this point in time is another
display of abysmal corporate governance. The fact that the CEO felt compelled to resign demonstrated in our view
that the current Supervisory Board will continue to inappropriately interfere with management to the detriment of
Balda and its shareholders.” 

Igor Kuzniar, a Managing Director at Octavian, said, “It is clearly time for an improvement of corporate governance
at Balda. Despite its distorted claims that the interests of Michael Chiang and his wife Yun-Ling Chiang are
somehow separate and not aligned, the Supervisory Board of Balda apparently continues to focus on protecting the
interests of the Chiang family rather than upholding its fiduciary duty to the company’s shareholders. The change of
the Board of Management roughly one month before the Extraordinary General Meeting can only be interpreted as
an attempt to take irreversible action ahead of the upcoming shareholders’ vote. We caution the members of the
Supervisory Board not to participate in any additional actions that may result in further harm to Balda’s shareholders
and we are committed to using all legal means available to us to ensure that the Supervisory Board and new Board
of Management are held accountable for any breach of their fiduciary duties.” 

Octavian today sent the following letter to Balda’s Supervisory Board:

January 5, 2012

Dr. Michael Naschke
Chairman of the Supervisory Board
Balda Aktiengesellschaft
Bergkirchener Str. 228
32549 Bad Oeynhausen
Germany

Dear Dr. Naschke:

We are writing to respond to the press release the Supervisory Board of Balda AG (“Balda”) issued on December
29, 2011 that included a series of inaccurate allegations about Octavian Advisors, LP (“Octavian”) and our desire to
elect three independent directors to the Supervisory Board of Balda at the company’s Extraordinary General
Meeting on February 8, 2012. Unfortunately, the statements in the Supervisory Board’s press release distort the
facts and present an incomplete picture of the state of affairs at Balda. We would like to respond to each of these in
turn.

   “…the Supervisory Board is still astonished about how Octavian could get hold of these Company´s 
1. secrets that now have been published in a way that may be disadvantageous to the Company and,
   consequently, to all of its shareholders.”
   We want to make clear that neither Octavian nor any of its affiliates or directors or officers have received or used
   any confidential or sensitive company information whatsoever. Our claims and allegations are solely based on or
   derived from publicly available information, in particular the publications made by Balda and its management and
   the information that was presented in shareholders’ meetings.
   “Octavian’s further allegations that two of the three members of the Company’s Supervisory Board
   were not independent or were subject to conflict of interests…are based on the wrong assumption that
2. Mr. Michael Chiang was the major shareholder of the Company. However, as is well known by the
   public notifications of voting rights held in the Company and that the Company’s major shareholder,
   Yield Return Investments Limited, is solely owned by Mrs. Yun-Ling Chiang.”
   It is our strong belief that circumstances indicate that Balda’s Supervisory Board has clearly acted in favor of
   Michael Chiang, his wife Mrs. Yun-Ling Chiang and other investors in TPK Holding Co., Ltd (“TPK”), rather
   than in the best interest of Balda and all its shareholders.
   We have reason to believe that two of the three members of the Supervisory Board, Mr. Yu-Sheng Kai and Mr.
   Chun-Chen Chen, are closely related to Balda’s biggest single shareholder, Mr. Chiang, as both are – to our
   knowledge – active in companies that are part of Mr. Chiang’s group and were nominated by Yield Return
   Investments Limited, an investment firm that to our knowledge in reality is run by both Mr. and Mrs. Chiang.
   Balda’s assertion that neither Mr. Chen nor Mr. Kai are employees of TPK is formalistic and misleading, if not
   downright wrong. For instance, as of May 31 2011, Mr. Chen has been listed as a Board member of Taiwan
   Video and Monitor Corporation, a company clearly “related in substance” to TPK according to TPK’s 2010
   annual report and thus a part of Mr. Chiang’s group. We also have indications that Mr. Kai is similarly involved in
   companies related to TPK or Mr. Chiang.
   Similarly, Balda’s assertion that Yield Return Investments is controlled by Mrs. Chiang and thus there is no direct
   relation to Mr. Chiang is formalistic and misleading and nothing more than another attempt to distort the truth and
   maintain the status quo.
   On February 20, 2009, Balda issued a press release stating that Max Gain Management Ltd. (“Max”) had
   acquired a 29.9% stake in Balda and that Max was controlled by Mr. Chiang. In this press release, Balda
   expressly welcomed Mr. Chiang as the company’s new controlling shareholder. Also, in a publication in January
   2010 pursuant to section 26 of the German Securities Trading Act, Balda stated that Max had transferred its
   shareholding to Yield Return Investments Limited. Balda pointed out that this was an exclusive Group-based
   transfer within the Chiang family and that the members of the Chiang family that were behind Yield Return
   Investments Limited were also the same ones that had indirect control of Max. The Company further elaborated
   that the transfer therefore had no effect on the existing percentage ownership of the Chiang family in Balda.
   This official company information is clearly contradictory to the statements made by Balda’s Supervisory Board
   on December 29, 2011.
   The Chiang family now holds a 27.6% stake in Balda worth approximately €50 million through Yield Return
   Investment. The conflict of interest arises as Mr. Chiang is also co-founder and Chairman of TPK, in which he
   and Mrs. Chiang hold a 25% stake worth approximately €500 million. As a remnant of an earlier joint venture,
   Balda in turn holds a 16.1% stake in TPK. At current market levels, this 16.1% stake alone is worth
   approximately 1.5 times Balda’s market capitalisation.
   It is apparent that several decisions made by the Supervisory Board have been to the detriment of Balda and its
   general shareholders, with the exception of Mr. and Mrs. Chiang and TPK, who have benefited from them.
   “The Supervisory Board of the Company understands that shareholders may doubt the Company’s
   decision not to sell its shareholding in the touch screen producer TPK Holding Co., Ltd. (“TPK”) at a
3.
   time when the stock exchange was favourable for such transaction. However, the better reasons
   argued for a refusal of the requested approvals in each of the respective cases.”
   The Supervisory Board’s failure to approve the disposal of Balda’s stake in TPK appears to be another example
   of its conflict of interest and we seriously question its judgment on this issue. By failing to approve such a sale
   when the TPK shares were worth more than three times Balda’s current market capitalization, we believe the
   Supervisory Board protected the interests of the Chiang family while depriving Balda shareholders of €350
   million in value after a subsequent decline in the value of TPK shares.
   “…the Company as a major shareholder of TPK (owning 16.1% of TPK or around 37.8 million TPK
4. shares) cannot dump TPK shares into the stock market recklessly to destroy the stability of TPK stock
   price and, hence, the value of its remaining TPK shares held.”
   This statement is inaccurate for several reasons. First, all Balda shares for which the lock-up had expired could
   have been placed simultaneously in one or several off-market transactions managed by any of the top investment
   banks active in Asia. There was never a need to “dump” the shares on the market and thus the sale would not
   have directly affected the share price of TPK.
   On the contrary, it is quite clear, and can be buttressed with numerous comments by sell-side analysts who follow
   TPK, that the inaction of the Supervisory Board itself has been a chief contributor to the weakness of the TPK
   shares. As more and more market participants positioned themselves for a sale of TPK stock which never came,
   they helped drive down the share price of TPK. Had the Supervisory Board acted swiftly and with conviction,
   rather than allowing damaging rumours take hold over more than six months, the perceived overhang would likely
   have been removed at once and much of the decline in TPK’s share price could possibly have been avoided.
   Finally, the Supervisory Board fails to specify what conditions exactly it was waiting for that were not in place
   when TPK’s stock was at 800 Taiwanese Dollar (“TWD”) and above. According to its logic that it didn’t sell the
   shares because it feared that the TPK share price would be affected, the TPK shares might never be sold, as one
   can always argue that risk exists to some extent.
   “In addition, the securities laws of Taiwan require the Company, before selling or buying, to file with
5. Taiwan authorities for change of its shareholding in TPK for more than 10,000 TPK shares, as by
   operation of law, the Company is deemed to be an insider.”
   To say that the TPK shares were not sold because regulatory filings in Taiwan were not in place is in our view
   simply another excuse. Following the Supervisory Board’s logic, the disposal of larger shareholdings by deemed
   insiders in listed Taiwanese companies would be impossible and Taiwanese shares unmarketable.
   “…it should be mentioned that Mr. Chiang helped out the Company in 2008 by paying a price for the
6.
   TPK shares (that had not been listed at that time).”
   In October 2008, Balda sold a 12% stake in TPK to Michael Chiang. While the exact terms were not disclosed,
   it appears that the shares were sold for not more than 20 TWD per share. When TPK went public two years
   later, the offer price was at TWD 220 and the shares closed at TWD 480 on the first day of trading and hence at
   a significantly higher price than the price paid by Mr. Chiang. In light of these facts, it is Octavian’s belief that Mr.
   Chiang’s transactions were not merely altruistic but rather commercially extremely remunerative for the Chiang
   family.
   “The Supervisory Board of the Company fears the elections of the candidates proposed by Octavian
7. would lead to severe conflicts of interests and would strongly deteriorate the Company’s corporate
   governance.”
   Octavian is seeking to replace the current members of Balda’s Supervisory Board at an Extraordinary General
   Meeting because we believe the current Board has failed to represent the best interests of Balda’s shareholders.
   Its failure, in our opinion, has led to a significant deterioration in shareholder value which must be immediately
   addressed through change at the Board level. We firmly believe a reconstituted Board that is free from conflicts
   of interests is vital to the Company’s future success.
   Octavian is therefore seeking to elect three independent and experienced directors who can evaluate the
   opportunities and challenges at Balda with an open mind and a fresh perspective, render neutral and unbiased
   advice to the Management Board in the interest of all shareholders and ensure accountability at the Board level.
   Our nominees – René Charles Jäggi, Behdad Alizadeh and Igor Kuzniar – possess the fortitude, skillsets, and
   experience to maximize value for all Balda shareholders.
   Neither René Charles Jäggi nor Behdad Alizadeh has conflicting business interests or business relations with the 
   Company in excess of their intended Board membership. The same applies to Igor Kuzniar, who would be the
   Board representative for a major shareholder in the company, which would not be unusual and, in the absence of
   further business relationships, makes his interests parallel to those of all other Balda shareholders.
   In addition, Octavian is deeply concerned that the current Supervisory Board members are not in a position to
   duly fulfil their duties given the significant misunderstandings regarding the legal requirements for Supervisory
   Board members in listed companies and the respective recommendations of the German Corporate Governance
   Code referred to in the Supervisory Board’s statement of December 29, 2011. In particular, the number of
   board positions held by Mr. Jäggi would not hinder a due fulfilment of the duties of a Supervisory Board member 
   of Balda. The Board memberships of Mr. Jäggi are neither in contradiction to German law nor the German 
   Corporate Governance Code. The statement by the Supervisory Board that his election could be declared null
   and void by a court is thus without any legal substance.

We are willing and prepared to seek an open dialogue with the Company, its management and stakeholders in order
to act in the best interest of Balda. However, we are extremely disappointed that, before this dialogue could take
place, Balda’s Supervisory Board has resorted to scurrilous allegations and obvious fabrications in order to try to
protect its position at the expense of the true owners of Balda, its shareholders.
Furthermore, the exchange of Rainer Mohr and the Board of Management roughly one month before the
Extraordinary General Meeting can only be interpreted as an attempt to take irreversible action ahead of the
upcoming shareholders’ vote. We caution the members of the Supervisory Board not to participate in any additional
actions that may result in further harm to Balda’s shareholders and we are committed to using all legal means
available to us to ensure that the Supervisory Board and new Board of Management are held accountable for any
breach of their fiduciary duties.

Sincerely,

Richard Hurowitz
Chief Executive Officer
Octavian Advisors, LP

cc: Supervisory Board

* * * 

Additional information regarding Octavian’s proposed course of action and recommended nominees is available at
www.ShareholdersForBalda.com.

About Octavian Advisors

Octavian Advisors, LP is a global investment firm with offices in New York and London. The firm focuses on special
situations and distressed investments in international markets, and has successfully invested in over 40 countries on
six continents. Octavian currently manages approximately $1 billion for leading endowments, foundations, pension
funds, family offices and institutions.

Contacts
For German media
CNC – Communications & Network Consulting
Lasse Schmid, +49 89 599 458 142
Lasse.Schmid@cnc-communications.com
or
Nicholas Wenzel, +89 599 458 115
Nicholas.Wenzel@cnc-communications.com
or
For International media
Sard Verbinnen & Co
Jonathan Doorley, +1-212-687-8080
JDoorley@sardverb.com

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Description: NEW YORK--(EON: Enhanced Online News)--Octavian Advisors LP (“Octavian”), which through various funds owns approximately 8.3% of the outstanding shares of Balda AG (“Balda”), issued the following response to the inaccurate allegations by Balda’s Supervisory Board in its press release on December 29, 2011. “Balda’s Supervisory Board has made a series of inaccurate allegations designed to obfuscate the fundamental point that the current members of the Board have in our view repeatedly failed to ac a style='fon
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