The keenly anticipated court battle between Asia Television's tycoon shareholders for control of the company finally began in the Court of First Instance yesterday. Many details of the complicated, multi-party changes in ATV's shareholding structure were revealed in the proceedings on Monday.

Leveling various accusations, Taiwanese businessman Tsai Eng-meng said ATV's key shareholder Payson Cha issued convertible bonds at a substantially lower price than agreed, which has breached his fiduciary duty as a director on the board, and the agreement between the pair in which Cha promised to help Tsai gain control of the broadcaster.

Lawyers representing Tsai said in late 2009, Cha issued convertible bonds at only HK$28 cents apiece and benefited from the purchase. This price is much lower than the HK$2.47 price stated in the shareholder's agreement, and also below the HK$1.37 per share Tsai paid earlier on to become a shareholder of ATV.

According to their earlier agreement, Cha was supposed to sell 2.75 percent of his shares to Tsai to give Tsai control of the board. Instead, Cha signed a contract with mainland property tycoon Wang Zheng to sell his entire stake at HK$0.59 per share, which would make Wang the new boss of the broadcaster if the deal is formally concluded.

Tsai's lawyer also countered the "unanimous approval" record for issuance of convertible bonds provided by Cha's lawyer at the court. Tsai's lawyer said at the board meetings dated November 11 last year that his client formally expressed clear opposition to the conversion price. But Cha, the major shareholder of ATV, who dominates the board, eventually approved the significantly lower price.

Tsai wants the court to cancel the agreement between Cha and Wang, which, Tsai believes, has also jeopardized the best interest of the broadcaster.

The agreement between the two, according to Tsai's lawyer, requires Tsai to invest HK$80 million in ATV over the years subject to the promise that Cha inject money into the broadcaster first, a requirement with which Tsai complied,while Cha, Tsai alleges, failed to fulfill his end of the deal.

Tsai, chairman of major Taiwanese snack company Want Want, filed the lawsuit against Cha last month, which sought to put Cha's share transaction with Wang on hold. Tsai has filed for a court injunction halting any share transaction between Cha and Wang, and has paid more than HK$20 million as a deposit to guarantee any loss Cha may suffer from a temporary injunction.

A HK$23 million injection paid into ATV was believed to be the advance for the transaction between Cha and Wang. Court proceedings will continue today.

Wang, chairman of Shenzhen-listed property developer Rongfeng Holding said earlier that he plans to invest HK$2 billion over the next 20 years in the broadcaster, adding that he is determined to build ATV into Asia's CNN.

China Daily

(HK Edition 04/13/2010 page2)