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Boardroom intrigue sends Sangyang Industries shares tumbling

TAIPEI, Taiwan -- Concerns ver the escalation of a boardroom coup at Sangyang Industries yesterday compelled the motorcycle maker's shares to tumble NT$2.17, or 7 percent, the maximum intraday movement allowed on the local market, to close at NT$28.85.

Stewardship of the company is bitterly contested by two opposing factions consisting of Sangyang's current management team, and a faction aligned to the market formed by two investment firms vying to usurp control of the company.

Regulator Exacts Repercussion as Row Escalates

Ahead of a shareholders' meeting taking place on Wednesday, company management yesterday set up extensive security measures with blockades at the venue of the meeting, preparing to impose stringent identification checks on attendants.

In response, the market-aligned faction filed a report to the Taiwan Stock Exchange (TWSE), resulting in the regulator's decision to limit trades of Sangyang shares to full-cash delivery only. As a result, prospects of limited liquidity of the shares sent prices tumbling by 7 percent at the end of yesterday's session.

According to the market-aligned faction, the stringent security measures set up by the management team is designed to deter shareholders' participation in the meeting's proceedings, and an attempt to allow the event to conclude without resolution by delaying an upcoming board of directors' elections.

The feud dates back to the 1980s when the company's two main founders Huang Ji-jun (黃繼俊) and Chang Kuo-an (張國安) parted ways over irreconcilable differences. Huang retained control of the company while Huang went on to found the FCF Group (豐群集團) whose operations include the OK Mart convenience store chain.

Reports indicate that a faction aligned to the market has leveraged its acquisition of 52 percent of Sangyang shares in circulation to secure five out of nine seats on the company's board of directors with the intent to oust its current management team headed by the current Chairwomen Huang You-mei (黃悠美), a descendant of company founder Huang Ji-jun.

Origin of the Dispute

Market rumors suggest that the boardroom coup originates from disputes over immense prospective profits from a real estate development deal for the company's Neihu-based facility, and that the market-aligned faction intends to install Chang Hong-chia, a descendent of Sangyang co-founder Chang Kuo-an as chairman. The market-aligned faction maintains that the company has failed to preserve its interest in the development project with the Meifu Group (美孚), who will take a 54-percent share of profits from the project compared to Sangyang's 46 percent, according to market rumors.

Most notably, despite the current management team's efforts in delaying the shareholders' meeting and the board of directors' elections, financial regulators announced that as the market-aligned factions have completed electronic voting with their 52 percent of voting shares, the outcome of the shareholders' meeting will remain valid even if the participation does not exceed the 50-percent threshold.

According to a Sangyang Industries shareholders' association, Chang has 25 years of experience in overseeing the company's operations as a board member, and that his return to the helm represents a chance to turn a new leaf for the firm. Chang's return will pave the way for the ascension of industry professionals to company leadership, said the association. Citing reports by foreign institutional investors ISS and Glass Lewis, Sanyang's current management team stated that there is no compelling evidence suggesting that change is required in the company's leadership. According to the reports by foreign institutional investors, the company's sales performance has been declining since the market-aligned faction secured seats on its board in 2011.

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