Apple’s Taiwan-based supplier is fighting an international investor over its multibillion-dollar cash pile in a case that signals growing shareholder activism in the territory.
Catcher Technology, which makes electronic housings for Apple devices made in China, is being challenged by Hong Kong-based investment firm Argyle Street Management to improve its management and return some of its $4.2 billion in net cash to shareholders, according to people familiar with the matter. discussions.
Argyle holds about 1 percent of Catcher’s shares and is one of a number of foreign institutional shareholders alongside Franklin Templeton, Singapore’s GIC and Cathay Life Insurance. She addressed Catcher executives with her 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, including in Hong Kong through HSBC and Bank of East Asia, and in Japan in relation to Toshiba, raised their profile.
Global investor appetite for Taiwan has increased in recent years, with foreign direct investment rising 275 percent to a 15-year high of $8 billion in the first half of 2022, thanks to the country’s large industrial base and its status as a gateway to China.
However, the island reliant on technology the stock market was hit after a sell-off in global funds and fears of a US recession.
Argyle accused Catcher management of “hoarding money” and using it to support a “bloated” executive structure, according to two people familiar with the situation. The company has a market capitalization of about $4 billion on the Taiwan Stock Exchange and is managed by three brothers from the Hung family who sit on its board.
In 2020, Catcher sold two units of its China division that supplied Apple’s iPhone cases for $1.43 billion to a smaller competitor, Lens Technology, based in the mainland province of Hunan. The layoff of one of its main revenue generators comes as Chinese companies seek new opportunities to access Apple’s coveted supply chain following the Sino-US trade war.
Argyle said that despite the divestment, Catcher had paid a “low” dividend of NT$10-NT$12 per share over the past five years totaling NT$42.95 billion ($1.43 billion) and said it would maintain that level dividends in the next three years.
About 15 percent of the shares in the Tainan-based company are owned by the Hung family, including its chairman Allen Hung, and about 43 percent are owned by foreign institutions.
Catcher said it is “currently in a phase of business transformation” and is diversifying into areas including automotive parts manufacturing and medical technology.
“The cash position we have retained is mainly for investment opportunities,” the company said. “We pay at least 50 percent of earnings as cash dividends. The cash dividends we have paid every year for the past five years are literally equal 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 he was “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 firms.