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PCCW buyout bid secures green light

(China Daily)
Updated: 2009-04-07 07:56

A shareholder makes his way to a PCCW shareholders' meeting in Hong Kong on Feb 4, 2009. [Bloomberg News]

The High Court in Hong Kong yesterday said it would allow controlling shareholders of PCCW to go ahead with the firm's $2.2 billion privatization plan despite the securities regulator's allegations of vote-rigging.

The ruling is expected to clear the way for controlling shareholder Richard Li, and China Netcom, now part of China Unicom, to proceed with their buyout offer.

Related readings:  PCCW deal rejected by PCRD vote  'Richard Li cannot vote his PCRD shares in PCCW sale'  HK banker buys 23% of PCCW  PCCW obtains freedom to set telecom prices

PCCW is due to submit its application to the Hong Kong Exchange to delist its shares from April 14 onwards.

The court rejected a request by the Securities and Futures Commission (SFC) to suspend the ruling or to hold up the controversial privatization process any further and also approved a proposed reduction in the company's capitalization.

SFC lawyer Winston Poon filed for an appeal and demanded to push backward the implementation of the ruling. The case will be brought to the Court of Appeal for trial next Thursday.

The court said the offer price provides a reasonable premium, at which the terms of the proposal are fair to the independent shareholders.

Li, through his company Pacific Century Regional Developments (PCRD), and Netcom offered to buy out minority shareholders for HK$4.20 a share last November. They sweetened the offer to HK$4.50 a share in December.

The $2.2 billion privatization plan was delayed after the SFC began probing alleged improper share transfer at PCCW under the privatization deal proposed by PCRD and Netcom in February.

Shareholder activist David Webb said in January he had received an anonymous email alleging PCCW shares were offered to insurance agents in exchange for supporting the buyout offer.

SFC lawyers said of the 1,404 shareholder votes cast in early February in favour of the privatization deal, 849 looked suspicious as they might have included those given out as bonus shares to the insurance agents, who were formerly PCRD employees.

SFC investigation earlier indicated that PCRD Deputy Chairman Francis Yuen and Fortis' Regional Head Lam Hau-wah talked on the phone three times before the latter purchased PCCW shares on Jan 5.

Both later claimed that they had forgotten the contents of the phone conversation.

High Court Judge of First Instance Susan Kwan said the SFC didn't collect sufficient evidence to prove the two people were involved in vote rigging as the contents of their phone conversation could not be retrieved.

The court said most of the PCCW shareholders had cast their votes in an honest manner. A Fortis spokesperson yesterday said that Lam is not a legitimate employee with Fortis Insurance.

Regarding the speculation that some agencies of Fortis Insurance received board allotment of PCCW shares, the spokesperson said most of them are self-employed. But the company has opened an investigation into the matter.

China Daily-Reuters