A shareholder vote that approved Hong Kong telecoms giant PCCW’s (電訊盈科) US$2.1 billion privatization move was manipulated by a city businessman, a court ruled yesterday.
Lam Hau-wah (林孝華), a senior manager at Fortis Insurance Company (Asia), dished out around 500,000 shares to insurance agents and others in return for them approving the controversial vote, the judgment said.
As a result of the manipulation, the bid should be scrapped, Justice Anthony Rogers wrote in a detailed opinion explaining an earlier rejection of the buyout by the Court of Appeal.
“Vote manipulation is nothing less than a form of dishonesty. The court cannot sanction dishonesty,” Rogers wrote.
The judge added: “There was a clear manipulation of the vote and because of the extent to which that happened the court cannot be sure that the vote was fair.”
The original decision over PCCW chairman Richard Li’s (李澤楷) attempt to take the city’s largest fixed-line operator into private hands was made by the court last month.
The full judgment had been keenly awaited by market watchers to assess what effect it may have on future privatization bids.
Li has since dropped the buyout plan. There was no suggestion in the judgment that Li was aware of any manipulation.
The long-running saga has gripped the financial hub because it pitted one of the city’s richest families — Li is son of Hong Kong’s richest man Li Ka-shing (李嘉誠) — against minority shareholders and the Securities and Futures Commission (SFC), a regulator.
The central question was whether a February shareholder vote to approve the privatization scheme had been unfairly rigged by some of Li’s associates.
The SFC said in court that the manipulation plot was hatched by Lam and Francis Yuen (袁天凡), a close Li associate and deputy chairman of Pacific Century Regional Developments (PCRD), the company through which Li was trying to buy PCCW.
Following phone conversations between the two, Lam bought 500,000 shares in PCCW and handed them out to his agents, under the guise of a bonus, and on the condition they support the vote, the SFC said.
At the time, the buyout bid was struggling to meet the so-called “head count” requirement that more than 50 percent of individual shareholders vote in favor of any privatization.
Rogers said there was not enough evidence to implicate Yuen, but he said that because Lam had given the shares away and paid for some associated costs, “he was in effect buying the votes.”
A group of minority shareholders, many of them elderly, fiercely opposed the buyout bid after seeing the value of their shares plummet from more than HK$100. Li and his partner China Unicom (中國聯通) were offering HK$4.50 per share.
PCCW, PCRD and Fortis have denied any knowledge of the manipulation. Although vote-rigging is not illegal in Hong Kong, if it is found that some voters had a relationship with the major shareholders, they are not counted as independent and can be ineligible to vote in such shareholder meetings.
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