HONG KONG: Corporate saga to culminate in Singapore vote on PCCW deal

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HONG KONG: Corporate saga to culminate in Singapore vote on PCCW deal
Minority shareholders' vote will bring weeks of speculation, controversy to an end

South China Morning Post
Wednesday, November 29, 2006

A corporate and family saga involving Asia's richest man culminates on Thursday at a private Singapore social club when minority shareholders vote on the proposed sale of Hong Kong's fixed-line telecommunications giant PCCW.

The deal has become mired in controversy since Richard Li Tar-kai, son of legendary Hong Kong tycoon Li Ka-shing and PCCW's chairman, announced earlier this year that he wanted to sell out, drawing bids worth as much as US$7 billion (HK$54.6 billion) from foreign investors for the firm's core telecoms assets.

That option, however, was vetoed by central government-owned China Netcom, PCCW's second-largest shareholder, which objected that the company should not be sold to foreign interests.

Amid dire warnings that such direct intervention by the mainland in Hong Kong's business affairs compromised its corporate governance standards, a close associate of Li Ka-shing stepped forward with a counter offer.

Francis Leung Pak-to, a well known investment banker, in July said he would buy the 23 per cent controlling stake held by PCCW chief Richard Li's Singapore-listed Pacific Century Regional Developments (PCRD) for HK$9.2 billion.

That appeared to keep everyone satisfied until the details of how it was to be financed became clear -- Mr Leung would rely heavily on Li Ka-shing for the funding, sparking an apparent change of heart on the part of Richard Li who seems to have objected to his father's role.

Last week, the younger Li was quoted by Ming Pao in Hong Kong as saying he was "very unhappy" with his father's involvement and would be pleased if PCRD shareholders rejected the deal.

"[I] am very unhappy with the result; I am full of confidence in PCCW's outlook and if [PCRD] minority shareholders vote down [the deal] ... I would be very happy," he was quoted as saying.

Richard Li said that instead, he was now willing to "continue to develop and lead PCCW", rather than wanting to sell his stake.

His comments prompted a critical response from analysts, especially since Thursday's vote by minority shareholders was seen as a very close call.

"It's obvious that the father tried to help the son and the son didn't appreciate it," said one analyst in Hong Kong who requested anonymity.

Castor Pang, a strategist at Sun Hung Kai Financial Group, said the apparent turnaround was "ridiculous".

"One minute he wanted to sell PCCW and the next minute he didn't. There is no logic in this. It's very strange ... It seems like a careless and casual decision he made and was not properly thought through," he added.

Analysts say the deal did not reflect well on corporate governance standards in Hong Kong, with smaller investors particularly ignored while larger parties, including Beijing, work out the details to their advantage.

Singapore's The Business Times interviewed PCRD shareholders opposed to the deal. One, Gregory Chan, told the newspaper a vote against the sale would "send a signal that the minority shareholders are not happy about how we've been treated".

Richard Li holds 75 per cent of PRCD but cannot take part in the vote under regulations governing connected transactions since his father is involved, leaving the deal to be decided by minority shareholders.

The extraordinary general meeting begins at 10am on Thursday in Singapore's Raffles Town Club.

Date Posted: 11/29/2006