Hong Kong telecom PCCW abandons privatisation bid
Friday, 24 April 2009
HONG KONG, Apr 23 (AFP): Hong Kong telecoms giant PCCW Thursday scrapped a US$2.1 billion bid by chairman Richard Li to take the firm private after he lost a dramatic court showdown with the city's regulators.
Li said he was "disappointed" by Wednesday's appeal court ruling but added the case had become a burden to the company and "unnecessarily divisive to society."
"From a commercial perspective and taking into account the company's interests... the privatisation proposal will now lapse," he said in a statement.
The long-running saga has gripped Hong Kong, a centre of international finance where a string of recent controversies has raised questions about oversight of its free-wheeling, deal-making culture.
The central question in court was whether a February shareholder vote to approve the privatisation scheme had been unfairly rigged by Li's associates.
The Securities and Futures Commission (SFC) watchdog argued that the deal was only approved because hundreds of insurance agents had been given tranches of PCCW shares in exchange for voting in favour of Li's bid.
The court case pitted many small shareholders, some of them elderly, against one of the city's most powerful tycoon families. Li's father, Li Ka-shing, is Hong Kong's richest man.
A group of minority shareholders fiercely opposed Richard Li's buyout bid after seeing the value of their shares plummet from more than 100 Hong Kong dollars.
Li, through his investment vehicle Pacific Century Regional Developments (PCRD), and with his partner China Unicom was offering $4.50 per share.
The watchdog said in court that the share-splitting plot was hatched by Francis Yuen, a close Li associate and deputy chairman of PCRD, and Lam Hau-wah, a senior manager at Fortis Insurance Company (Asia).
Following phone conversations between the two, Lam bought 500,000 shares in PCCW and handed them out to his agents, under the guise of a bonus.
The SFC said the shares were given out on condition the agents supported the buyout bid.
At the time, the firm was struggling to meet the so-called "head-count" requirement that more than 50 per cent of individual shareholders vote in favour of any privatisation.
PCCW, PCRD and Fortis have denied any wrongdoing.
Although vote-rigging is not illegal in Hong Kong, if it is found that some voters had a relationship with the major shareholders, they are not counted as independent and are ineligible to vote in such shareholder meetings.
Jamie Allen, secretary general of the Asian Corporate Governance Association, welcomed the court's decision and said the privatisation had threatened to damage Hong Kong's international reputation.
"The terms of the buy-out were egregious," he told the news agency.
"The government now needs to look again at the head-count rule, so investors have some clarity."
Hong Kong-listed shares in PCCW, which had been suspended while the case was ongoing, closed down 13.11 per cent at $3.58 Thursday.
Some of the angry investors, many of them elderly, spoke during the court hearing. One tearful shareholder told the court that PCCW was "no different from robbers."
Li, who has been trying to sell or privatise PCCW for three years, also said the firm would give a special 1.30 Hong Kong dollars (17 US cents) per share dividend to shareholders in lieu of a final dividend for 2008.
Li said he was "disappointed" by Wednesday's appeal court ruling but added the case had become a burden to the company and "unnecessarily divisive to society."
"From a commercial perspective and taking into account the company's interests... the privatisation proposal will now lapse," he said in a statement.
The long-running saga has gripped Hong Kong, a centre of international finance where a string of recent controversies has raised questions about oversight of its free-wheeling, deal-making culture.
The central question in court was whether a February shareholder vote to approve the privatisation scheme had been unfairly rigged by Li's associates.
The Securities and Futures Commission (SFC) watchdog argued that the deal was only approved because hundreds of insurance agents had been given tranches of PCCW shares in exchange for voting in favour of Li's bid.
The court case pitted many small shareholders, some of them elderly, against one of the city's most powerful tycoon families. Li's father, Li Ka-shing, is Hong Kong's richest man.
A group of minority shareholders fiercely opposed Richard Li's buyout bid after seeing the value of their shares plummet from more than 100 Hong Kong dollars.
Li, through his investment vehicle Pacific Century Regional Developments (PCRD), and with his partner China Unicom was offering $4.50 per share.
The watchdog said in court that the share-splitting plot was hatched by Francis Yuen, a close Li associate and deputy chairman of PCRD, and Lam Hau-wah, a senior manager at Fortis Insurance Company (Asia).
Following phone conversations between the two, Lam bought 500,000 shares in PCCW and handed them out to his agents, under the guise of a bonus.
The SFC said the shares were given out on condition the agents supported the buyout bid.
At the time, the firm was struggling to meet the so-called "head-count" requirement that more than 50 per cent of individual shareholders vote in favour of any privatisation.
PCCW, PCRD and Fortis have denied any wrongdoing.
Although vote-rigging is not illegal in Hong Kong, if it is found that some voters had a relationship with the major shareholders, they are not counted as independent and are ineligible to vote in such shareholder meetings.
Jamie Allen, secretary general of the Asian Corporate Governance Association, welcomed the court's decision and said the privatisation had threatened to damage Hong Kong's international reputation.
"The terms of the buy-out were egregious," he told the news agency.
"The government now needs to look again at the head-count rule, so investors have some clarity."
Hong Kong-listed shares in PCCW, which had been suspended while the case was ongoing, closed down 13.11 per cent at $3.58 Thursday.
Some of the angry investors, many of them elderly, spoke during the court hearing. One tearful shareholder told the court that PCCW was "no different from robbers."
Li, who has been trying to sell or privatise PCCW for three years, also said the firm would give a special 1.30 Hong Kong dollars (17 US cents) per share dividend to shareholders in lieu of a final dividend for 2008.