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Hong Kong Court blocks Li's PCCW buyout

(China Daily)
Updated: 2009-04-23 07:46

People walk past PCCW phone booths in Hong Kong. [Bloomberg News]

PCCW Ltd Chairman Richard Li's plan to buy out Hong Kong's biggest phone carrier was blocked by the Hong Kong Court of Appeal yesterday after the city's stock-market regulator objected to the deal.

Judges Anthony Rogers, Johnson Lam and Aarif Barma upheld the objection by the Securities and Futures Commission (SFC), which said shareholders' votes were manipulated to ensure the deal went through. The court overruled a ruling earlier this month in favor of PCCW.

"The company is disappointed at the Court of Appeal's decision," PCCW said in a statement. The company will study the ruling before commenting further, it said.

Related readings:  HK Court blocks Li's PCCW privatization  PCCW 2008 net profit falls 15 percent  PCCW buyout bid secures green light  SFC may probe PCCW

The case tested regulations governing takeovers in Hong Kong, where minority support is tallied by headcount as well as shares held, a rule intended to protect smaller investors. The commission's unprecedented legal challenge to the HK$15.93 billion buyout bid led by Li, the son of Hong Kong's richest man, was based on claims free PCCW stock was given to hundreds of investors so they could vote for the deal.

"The case generally is a landmark, first because of the underlying issue in relation to the propriety of shares splitting, and secondly because of the robust stance the SFC is taking," Paul Li, a partner at law firm Simmons & Simmons in Hong Kong, said before the ruling. "The crux is whether or not it's possible to show that the share-splitting was done for an improper purpose."

The commission appealed this month's ruling by Judge Susan Kwan, who said there is insufficient proof the stock transfers were linked with Li's firms.

PCCW stock, suspended from Hong Kong trading at HK$4.12 since the court hearing started April 16, has declined 97 percent since their 2000 peak. The stock fell to HK$2.51 on October 13 before Li and China Network announced the takeover plan.

The HK$4.5-a-share buyout offer gives PCCW shareholders who are concerned about the firm's "short-term prospects" an opportunity to exit their investments, Denis Chang, a lawyer for Li's Pacific Century Regional Developments, told the court.

PCCW yesterday reported full-year profit fell 15 percent to HK$1.27 billion as the carrier spent more to attract customers and demand for phone services fell amid the recession.

Li, the 42-year-old son of Hong Kong's Li Ka-shing, made his buyout bid after the company failed to sell a stake in its main telecommunications assets to private equity investors in October as global markets slumped.

Bloomberg News