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Taiwan Apple supplier vs activists over $4 billion in cash

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

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

Argyle holds about 1% of Catcher and is one of its foreign institutional shareholders along with Franklin Templeton, GIC of Singapore and Cathay Life Insurance. It reached out to Catcher executives about its concerns during a meeting in Taiwan, one of the people said.

Shareholder activity has grown more slowly in Asia than in the US due to the dominance of family-controlled companies, but recent peak battles include in Hong Kong. via HSBC and East Asia Bank, and in Japan with Toshiba, have raised their profile.

Aspiring global investors Taiwan has been on the rise 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 nation’s large industrial base and status as a gateway to the country. entrance to China.

However, the island of dependent on technology Stock markets took a hit following a sell-off in global funds and fears of a US recession.

Argyle has accused Catcher’s management of “hoarding cash” and using it to support a “bulky” operating 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 the three Hung brothers, who sit on the board of directors.

In 2020, Catcher sold two devices from the China division that supplied iPhone cases to Apple for $1.43 billion to a smaller competitor, Lens Technology, based in Hunan province, the mainland. . The divestment at one of its main revenue-generating companies comes as Chinese companies are looking for new opportunities to access Apple’s coveted supply chain in the wake of the Sino-US trade war.

Argyle argued that, despite the handling, Catcher has paid a “low” dividend of NT$10-12 per share over the past five years, totaling NT$42.95 billion (1.43). billion USD) and said it would maintain that dividend for the next three years.

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

Catcher said it is “currently in a business transformation” and is diversifying into areas including auto parts manufacturing and medical technology.

“The cash we keep is primarily for investment opportunities,” the company said. “We pay at least 50% of our income as a cash dividend. The cash dividend that we have paid each year for the last 5 years is actually equivalent to our paid-in capital, which is essentially above the market average.”

In July, Taiwanese prosecutors charged 14 people including members of Catcher’s research and development team with breach of trust and obtaining trade secrets for use abroad. Catcher said in a statement at the time that it “cooperates with the investigation and follows judicial procedures and rulings”.

Taiwan has stepped up efforts in recent years to prevent the leakage of sensitive technologies, such as semiconductors, into the mainland. In 2021, Taipei moved to restrict domestic tech companies from selling assets or subsidiaries to Chinese companies.

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