Three of the four warring sons of late Evergreen Marine Corp (EMC) founder Chang Yung-Fa have failed to prevent a share buyback proposal by Evergreen Marine Corp, the owner and operator of the Taiwan-based shipping line.
In proposals to reduce debt and restructure its shareholdings, EMC proposed buying back 60% of the share capital, which it said would be “beneficial in enhancing shareholder equity”. EMC board member Chang Kuo-Hua has been in conflict with his brothers since YF Chang died in 2016.
That conflict overflowed into the shareholders’ AGM on 30 May, with one shareholder opposing the decision taken by the board of directors in March this year to buyback shares, urging other shareholders to vote down the proposals. In the event, 79.63% of shareholders present backed the board and the share buyback scheme was passed.
The three younger sons are major shareholders in the Panama-registered company Evergreen International Corp (EIC), and this company retains a minority share, 4.96%, in EMC.
Having accrued profits of NT$239bn ($8.25bn) EMC said its debt ratio had fallen to 41.52% with an “abundant” cash flow. Moreover, Q1 revenues had increased 90% to NT$170.8bn ($5.9bn).
“On the premise of sufficient accumulated surplus and working capital, after a capital reduction the company would still have ample funds for follow-up investments and future development,” said an EMC statement.
However, EIC through its company lawyer, Chu-chun Wu, opposed the move, arguing that all shareholders are the owners of a company and they should be “rewarded” for their support.
“If Evergreen Marine Corporation believed that it had sufficient capital at the moment and intended to buy back stocks, it shall do so in the form of ‘treasury stocks;’ that is, the company shall use its own capital to buy back outstanding shares on the open market,” read an EIC comment on the share buyback proposal.
According to Mr Wu the buyback scheme looks as though the company is returning cash to shareholders but in reality, this is not the case.
Mr Wu said: “On [the] surface, it looks as though the company is giving out money to its shareholders, but actually it is detrimental to shareholders’ interests, although they are getting their rightful money back; especially to those minor shareholders, a 60% capital reduction only brings ‘inconveniences and troubles.”
According to EIC, the EMC proposal said the scheme “stirs up the suspicion” that EMC is looking for profits for its major shareholders, at the cost of minor investors.
“Is it possible that major shareholders, which have purchased Evergreen Marine Corporation’s convertible bonds, can take advantage of this opportunity and make significant profit from getting their cash back without paying any tax. Later on, is it possible for them to obtain shares through convertible bonds, and thus increase their numbers of stocks for greater shares of the profit that originally belonged to all shareholders?” asked Mr Wu.
KH Chang, the chairman at EMC and the eldest of four brothers, has been locked in a battle with his siblings since their father died in 2016.
Chang Kuo-Wei, was chairman of Eva Air, but was ousted by his brothers and founded Starlux Airlines. KW Chang is thought to retain shares in EIC and forms part of the opposition to Chang Kuo-Hua. The three other brothers, including, Kuo-Hua, Kuo-Ming and Kuo-Cheng also inherited shares in EVA Airways and hotels in Taiwan, mainland China, Paris and Bangkok.
