Telstra faces court on Autohome sale

27 Jun 2016

Australia’s Telstra Corp. said it still faces “residual litigation” over its sale of a 47-percent stake in Chinese auto site Autohome Inc. to China’s second biggest insurer, Ping An Insurance Group Co., for $1.6 billion U.S..

A consortium led by Autohome’s chief executive officer James Qin Zhi had sought to scuttle the sale and had planned its own management buyout.

A terse announcement by Autohome on May 27 was the first indication of the behind-the-scenes battle raging for control of the company. It said that a petition had been filed under section 94 of the Cayman Islands Companies Law by “certain minority shareholders of the company”.

The consortium, which has backing from private equity firms Boyu Capital, Sequoia China and investment management firm Hillhouse Capital, reportedly made three separate offers for Telstra’s stake.

The bids valued Autohome, which is listed at $31.50 U.S. a share, were higher than Ping An’s final bid for a 48-percent stake at $29.55 U.S. a share.

It is understood that the Autohome and independent directors did not attend the official board meeting to approve Ping An’s offer on Friday, May 13. Thus Telstra, which had a right to appoint a sixth director, did so to pass the deal. As we previously reported, it appointed Ajinkya Mukhopadhyay as the sixth director on Autohome’s board, where it had five of 10 board seats already.

Sources told the Australian Financial Review that the non-Telstra directors were concerned that the telco had not sent the deal to the board’s audit committee to review the registration rights issue and that Telstra did not consider the deal a related-party transaction. It is also understood that a complaint has been filed with the U.S. Securities Exchange Commission regarding the matter.

According to those close to the board, for Telstra to officially elect its sixth board member, it needed to do so in writing to an office in the Cayman Islands, where Autohome is incorporated.

Due to this, some are arguing that Telstra’s director appointment is not valid and the sale of its Autohome stake to Ping An voted on by the board did not have a quorum.

 

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Don Gasper