PCCW scraps privatization after court stay

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(China Daily)
Updated: 2009-04-24 07:48

Hong Kong telecom company PCCW has abandoned, at least for now, its $2.2-billion privatization plan after it was blocked by the court on Wednesday.

The ruling by a Hong Kong appeals court was a setback for Richard Li, PCCW's chairman and largest shareholder, who was leading the buyout plan along with other major shareholders, and a boost for the city's securities watchdog, which had alleged vote-rigging in the deal.

Li yesterday said in a statement that he regretted how the whole process played out. In a separate statement, PCCW said it would pay a special dividend of HK$1.3 per share.

PCCW's shares dropped 14 percent to HK$3.54 yesterday after hitting a near 4-month low of HK$3.4 as trading resumed after being suspended from April 16, when the appeal hearing began.

PCCW said it would study details of the ruling before deciding on its next move. "This may not be the end of the story, given that Li may appeal," said Marvin Lo, analyst at Daiwa Securities.

As it stands, Li must wait at least another year before he can make another bid for PCCW. Li has had three failed attempts to sell his stake in the company, whose value has plunged 97 percent since 2000.

"I genuinely wanted to, through the privatization proposal, give minority shareholders an opportunity to exit for cash at a substantial premium to the market price," Li said.

"I feel sorry minority shareholders have lost this chance... We still believe this was the correct decision for all stakeholders," said Li, who led the privatization bid through his Pacific Century Regional Developments holding company.

The Securities and Futures Commission (SFC) began its probe on the buyout after shareholder activist David Webb lodged a complaint about the transfer of PCCW shares before the Feb 4 vote. More than 800 people became registered as PCCW shareholders shortly before the ballot after some investors divided their holdings and distributed them to hundreds of agents at Fortis Insurance (Asia) Co, a company previously owned by Li, according to the regulator.

The decision of the appeals court "vindicates the SFC's intervention in the court's hearing to sanction the scheme and our ongoing investigation into allegations of malpractice and manipulation of voting at the shareholders' meeting", Martin Wheatley, chief executive officer of the SFC, said after Wednesday's ruling.

Bloomberg News-Reuters

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