September 24, 2021

Telstra’s Autohome sale faces Cayman Islands court action

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1464167762416By Max Mason From Financial Review

Telstra’s $2.1 billion sale of most of its majority stake in Autohome to insurer Ping An will face a court challenge after it emerged a group of executives from the Chinese car classifieds company had planned their own takeover.

A management consortium, led by Autohome chief executive James Qin, has tried to halt the $US1.6 billion ($2.1 billion) deal, which was announced in April.

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

The bids, which had varying structures but valued Autohome, which is listed on the New York Stock Exchange, at $31.50 a share, were higher than Ping An’s final bid for a 48 per cent stake at $29.55 a share. Telstra plans to retain a 6.5 per cent interest in Autohome after the sale.

Telstra noted the court challenge in an announcement to the market on Wednesday.

“A petition has been filed in the Cayman Island courts by certain minority shareholders of Autohome relating to the sale of Autohome shares by Telstra to Ping An,” the company said. “Telstra intends to contest the petition.”

Time to exit

Sources were conflicting about which details of management consortium offers were binding.

It is understood that Telstra believed Ping An was a good partner for Autohome, given its insurance background, and the telco believed it was the best time to exit the business with rivals ready to invest heavily.

On Friday, May 13, at a meeting to approve Ping An’s offer, Telstra appointed a sixth director to Autohome’s board, where it had five of 10 board seats already.

It is understood that the Autohome and independent directors did not attend the official board meeting, hence Telstra, which had a right to appoint a sixth director, did so to pass the deal.

Sources said 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 to the US Securities Exchange Commission in regards to the matter.

According to those close to the board, in order 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.

Fairfax Media Australia

IMAGE: Telstra’s sale of its Autohome stake is being fought by a management consortium.

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