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HONG KONG -- The old way of doing business in Asia has been under attack since the financial crisis of 1997, but rarely has the old guard come under the kind of frontal assault such as the one the venerable

Jardine Group

is weathering.

Last week, a group of U.S. shareholders launched an attack on the managers of the group, which was made famous in James Clavell's Hong Kong novels.

For potential investors in Jardine companies, this could be a tempting week to jump in on some chronic underperformers, given the jolt to share prices this challenge has caused. But jumping too soon could prove costly. While Jardine management may eventually surrender, this is only round one of what could be a protracted fight that eventually ends up in U.S. court.

With interests in land, retailing, cars and much else in Asia, Jardine still should be something close to the powerhouse it once was. Instead, earnings per share are down 50% since 1995, even though its Web page says the group's goal "is to achieve consistent growth in shareholder value."

The frustrated outsiders who have stuck with Jardine stock have a simple problem -- corporate transparency. Nobody appears to have told the group that the Asian crisis of three years ago has pushed accountability to the fore. The group is still run by the Keswicks, descendants of the 19th century Scottish opium runners who founded the company and who still call the shots despite owning about 11% of the flagship company,

Jardine Matheson



That leadership was challenged earlier this week by San Diego-based

Brandes Investment Partners

, which is one of the largest investors, with a roughly 8% stake. They are sick of Jardine's poor performance. Brandes has motioned that the cozy cross-holdings that give the London-based Keswicks iron-clad control of the empire should be dismantled at the Jardine annual meeting. That meeting is scheduled to be held in Bermuda on June 1.

Jardine stocks soared on the news as hope sprung that new management could help solid, cash-generating businesses that trade at 40% below their book value. Yet the best action that analysts could muster was an


upgrade from sell to hold. HSBC has had no underwriting relationship with Jardine for the last year.

The analysts realize that even those bringing the motion understand it's going to be a long slog to unseat the Keswicks. "If the directors wish to vote their cross-holdings, we recognize there's a high probability the resolutions won't pass," said Brent Woods, managing partner at Brandes.

Still, there was an initial rush of excitement on the market, on hopes that Brandes and others would prevail eventually. Jardine Matheson rose more than 5%. The group's prestigious hotel chain operator,

Mandarin Oriental


, jumped 7.7%. In Singapore, grocery and drugstore chain

Dairy Farm

rose 9%.

The battle is over a corporate empire rich in history. China has long disliked the Jardine group, not the least because it was among the most aggressive of the companies pushing opium into China in exchange for tea. When China and Britain agreed on the transfer of Hong Kong in 1984, Jardine wasted no time in moving its headquarters from Hong Kong to Bermuda, a vote of no confidence in Beijing. Then, when the stock exchange refused to write special anti-takeover rules for it, Jardine moved its listing to Singapore (it's had one in London all along).

Since then, through bad numbers and the fact that it's a largely Hong Kong business with a Singapore stock, the group has fallen off most radar screens.


Hansberger International Fund is one of the only publicly traded mutual funds with a big Jardine holding, which could be one reason the fund ranked 217 out of 221 funds in its category over three years.

Brandes' problem with the Keswicks' lock on Jardine is that because the group's two main holding companies -- Jardine Matheson and

Jardine Strategic


-- own shares in each other, the directors (who serve on both boards) effectively oversee themselves. In addition, two interlocking companies reduce liquidity and increase administrative costs, Brandes said in its members' resolution.

Jardine's answer, published in a letter to shareholders that was sent out last week, is that the cross-shareholding has been in place for years, that investors knew about it when they bought in and that stability in management is a good thing.

Jardine officials didn't return a phone call seeking comment.

Brandes is seeking to abolish the interlocking board structure, but that would leave the Keswicks' tiny holding exposed to a takeover. The interlocking boards are designed to prevent just such a thing from happening.

So why even consider buying the shares now? "The real fireworks will begin subsequent to the vote -- when Brandes and others will have to decide whether legal action is tolerable," said Scott Benesch, an analyst with

Donaldson, Lufkin & Jenrette

in Hong Kong. "If a large majority of minority shareholders vote in favor of the resolutions

and lose, we believe an investor and media uproar could ensue."

A major ally for Brandes if it continues its fight is Greg Terry, formerly a member of Jardine Matheson's board and the company's general counsel. Now head of

Brierly Investments

in Singapore, Terry worked at the heart of the system that Brandes now seeks to destroy.

Comparing the growth rates of Jardine with other conglomerates in Asia, such as Li Ka-shing's

Hutchison Whampoa


, Terry defended the Brandes action against the Keswicks: "It's hard to argue that there's some God-given right for this lot to stay in management."