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Thu, Nov 30, 2006 - Page 10 News List

Shareholders to conclude PCCW stake selloff saga

SINGAPORE STING The decision by Richard Li to sell a controlling stake in the telecoms giant has exposed flaws in Hong Kong's corporation laws


A corporate and family saga involving Asia's richest man culminates today at a private Singapore social club when minority shareholders vote on the proposed sale of Hong Kong telecom firm PCCW Ltd (電訊盈科).

The deal has become mired in controversy since Richard Li (李澤楷), son of legendary Hong Kong tycoon Li Ka-shing (李嘉誠), announced earlier this year he wanted to sell out, drawing bids worth up to US$7 billion from foreign investors.

That option, however, was vetoed by Beijing-owned China Network Communications Group (中國網通集團), PCCW's second-largest shareholder, who objected that the company should not be sold to foreign interests.

Counter offer

Amid dire warnings that such direct intervention by China 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 (梁伯韜), a well known investment banker, said in July he would buy the 23 percent controlling stake held by PCCW chief Richard Li's Singapore-listed Pacific Century Regional Developments (PCRD) for US$1.17 billion.

That appeared to keep everyone satisfied until the details of how it was to be financed became clear -- 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 the Chinese-language newspaper 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.

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 today's vote by minority shareholders is 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.

`Bad reflection'

Analysts say the deal does 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 percent 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 today in Singapore's Raffles Town Club.

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