A Taiwan-based Apple supplier is battling an international investor for its multibillion-dollar cash pile in a case that signals growing shareholder activism in the territory.
Catcher Technology, which makes electronic casings for Apple devices made in China, is being challenged by Hong Kong-based investment firm Argyle Street Management to improve its governance and return some of its $4.2 billion in cash net to shareholders, according to people familiar with the discussions.
Argyle owns approximately 1% of Catcher’s shares and is one of its foreign institutional shareholders along with Franklin Templeton, Singapore’s GIC and Cathay Life Insurance. He approached Catcher executives about his concerns at a meeting in Taiwan, one of the people said.
Shareholder activism has grown more slowly in Asia than in the US due to the dominance of family-controlled companies, but recent high-profile battles such as in Hong Kong over HSBC and Bank of East Asia, and in Japan for Toshiba, have raised their profile. .
Global investor appetite for Taiwan has increased in recent years, with foreign direct investment up 275% to a 15-year high of $8 billion in the first half of 2022 due to the country’s large industrial base and its status as a gateway to China.
However, the technology-dependent island’s stock market was hit after a sell-off in global funds and fears of a recession in the United States.
Argyle has accused Catcher’s management of “hoarding cash” and using it to support a “bloated” executive structure, according to two people with knowledge of the situation. The company has a market capitalization of about $4 billion on the Taiwan Stock Exchange and is run by three brothers of the Hung family who sit on its board.
In 2020, Catcher sold two units of its Chinese division that supplied Apple’s iPhone casing for $1.43 billion to a smaller competitor, Lens Technology, based in the mainland province of Hunan. The divestment of one of its biggest revenue generators comes as Chinese companies seek new opportunities to access Apple’s coveted supply chain following the China-US trade war.
Argyle argues that despite the disposal, Catcher has paid a “low” dividend of NT$10-NT$12 per share over the past five years which has amounted to NT$42.95 billion ($1.43 billion) and said which would maintain this level of dividends for the next three years.
About 15% of the Tainan-based company’s shares are owned by the Hung family, including its chairman Allen Hung, and about 43% are owned by foreign institutions.
Catcher said it was “currently in the business transformation stage” and was diversifying into areas such as auto parts manufacturing and medical technology.
“The cash position we maintain is primarily for investment opportunities,” the company said. “We pay out at least 50 percent of earnings as cash dividends. The cash dividends we’ve paid out every year for the past five years are literally equivalent to our paid-in capital, 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 taking trade secrets for use overseas. Catcher said in a statement at the time that it is “cooperating with the investigation and following court proceedings and rulings.”
Taiwan has stepped up efforts in recent years to prevent the leakage of sensitive technologies, such as semiconductors, to the mainland. In 2021, Taipei decided to restrict domestic technology companies from selling assets or subsidiaries to Chinese companies.