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Bank of East Asia’s agreement to sell a 9.53 per cent stake to Sumitomo Mitsui Banking Corp is under attack from an activist US hedge fund in what is likely to be the opening salvo in a new assault on one of the city’s last family banking dynasties.

Summons served last month on the bank and all 18 board directors by companies connected to New York fund manager Elliott Advisers were the subject of a court hearing yesterday in which lawyers argued over how long BEA should be given to respond to the suit. The next hearing is due within eight weeks.

The contents of the summons were not detailed in court, but a lawyer for the fund manager alleged that BEA had abused its mandate during September’s sale of 222 million new BEA shares to Sumitomo, Japan’s No2 bank by asset size. The deal that is subject to regulatory approval.

Under the agreement, Sumitomo’s stake in BEA will rise by 9.53 percentage points to about 19.1 per cent, making it the single largest shareholder.

“BEA and its board believe that the proposed placement is in the best interests of our shareholders as it will further strengthen the bank’s core capital by means of investment on the part of a long-term committed shareholder and highly reputable financial institution,” a company spokesman said.

It is not clear what Elliott’s end game is, but it was an aggressive entrant into last year’s battle for Wing Hang Bank when it bid up the lender’s stock before a final sale to Singapore’s Oversea-Chinese Banking Corp. Directly or via offshore holding companies, Elliott holds a 2.5 per cent stake in BEA, worth about HK$1.8 billion, the court heard.

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