Investors back rail merger proposal
The vast majority of the Mass Transit Railway Corp's (MTRC) shareholders backed the proposed merger with Kowloon-Canton Railway Corp (KCRC) at the company's extraordinary general meeting on Tuesday.
Over 82 percent of investors endorsed the merger, while some 17 percent vetoed the HK$12 billion deal, which requires agreement from half of the 280,000 shareholders who account for 24 percent of the MTRC's public float.
The Hong Kong government, which owns the remaining 76 percent of the MTRC, is not qualified to vote under listing rules.
The approval is in line with analysts' expectations. They believe the deal will benefit both operators and commuters.
The merger would result in fare reduction and better planning of the city's rail network, said Castor Pang, strategist from Sun Hung Kai Financial Group.
During the two-hour extraordinary general meeting on Tuesday, investors asked company directors about future fare cuts, a pre-arranged fare-setting mechanism and a revenue-sharing formula proposed in the merger plan.
The long-awaited deal, known as the "rail merger", was first put forward in 2004.
Unlike other corporate mergers, the deal is a mixture of property purchases and leasing of railway assets under onerous terms from the KCRC, which is wholly owned by the SAR government.
Opponents urged the proposal be rejected, saying it would strip the company of its commercial autonomy.
Trading of MTRC shares was suspended on Tuesday after it touched a record high of HK$26.35 on Monday afternoon. The stock closed at HK$25.6, gaining 1.6 percent, with nearly 30 million shares changing hands on volume of HK$771 million.
Last week Morgan Stanley released a report saying the merger would boost the MTRC's net asset value by HK$4.4 to HK$21 per share.
The investment bank raised the stock's target price to HK$19 from HK$16.8. But it said the current share price has more than reflected the value of the merger and potential enhancement in the future. "Further positive surprises are limited," said the report.
MTRC shareholder activist David Webb said earlier he believes a lot of fund managers have sold MTRC shares in the last few weeks as the price was not based on fundamentals.
The MTRC began operation in 1979. It carries about 2.3 million passengers daily.
(China Daily 10/11/2007 page15)
