Buyout bid for HK telecoms giant PCCW on hold

Tycoon Richard Li's tortuous struggle to privatise telecoms giant PCCW faced another twist Monday when Hong Kong's Court of Appeal halted the move just hours after a lower court gave the green light.

Li, the chairman of PCCW, was celebrating when the city's High Court approved the 2.1 billion dollar buy out Monday afternoon, despite claims by Hong Kong's financial watchdog that a shareholder vote was rigged.

But in a dramatic turn of events, a few hours later the Court of Appeal put the bid on hold until April 16, when it will hear an appeal against the ruling by the Securities and Futures Commission (SFC).

The legal tussle marked the latest of Li's trouble-plagued attempts to offload the city's largest fixed-line operator, after he first moved to sell it three years ago.

Despite the appeal, Li's company remained confident that the scheme would be implemented by its scheduled deadline of April 23.

"The April 16 date is a workable timetable," a spokesman for Pacific Century Regional Developments (PCRD), through which Li made the buyout offer, told AFP Monday night.

The son of billionaire Li Ka-shing, one of Asia's richest businessmen, Richard Li has faced shareholder ire and an SFC probe in his latest battle.

The struggle has gripped the tycoon-obsessed financial hub and highlighted the small, interconnected group of businessmen that control many of the city's major firms.

High Court justice Susan Kwan earlier gave the buyout the go-ahead Monday, following a two-day hearing last week where the SFC claimed a February shareholder vote that approved the deal had been manipulated unfairly.

"On the evidence before me, I am satisfied that the scheme is one as to which an intelligent and honest man... acting in respect of his interests, might reasonably approve," Kwan said, in a written judgement.

Kwan said there was no substantial evidence that the vote had been rigged and the SFC's argument was "merely suspicion".

The SFC said in court the scheme had only gained shareholder approval at February's vote after insurance agents for Fortis Insurance Company (Asia) were given tranches of shares on condition they backed the privatisation.

The watchdog said the plot to split shares was hatched by Francis Yuen, the former deputy chairman of PCCW and former chief executive of the local stock exchange, and Lam Hau-wah, a senior manager at Fortis.

Yuen is now deputy chairman of PCRD.

Fortis Insurance Company (Asia) was previously a unit of PCRD, when Yuen used to run it.

After several phone conversations between Lam and Yuen in January, Lam bought 500,000 shares in PCCW and then handed them out to his employees under the guise of a bonus, the court heard.

Although vote-rigging is not an offence in Hong Kong, if it is found that some voters had a relationship with the major shareholders, they are not counted as independent and are ineligible to vote in such shareholder meetings.

Hong Kong law requires that more than 50 percent of individual shareholders support any privatisation move.

Li has made three efforts to take the telecoms firm private in recent years, with the first reportedly blocked by Beijing and the second by minority shareholders.

A large group of current shareholders are furious at the latest scheme, and were ordered out of court by Kwan after shouting from a packed public gallery that her decision was unfair.

Shareholder Leung Kwok-keung said outside court that he would stop buying shares in Hong Kong.

"I would not invest in any stocks or properties in Hong Kong from now on. The market is not transparent and unfair. It's not worth it," he told AFP.

"What is most worrying is seeing that the SFC, which is supposed to be protecting the rights of small investors, was completely toothless in face of large companies."

Shares in PCCW have plummeted from more than 130 Hong Kong dollars in 2000, at the height of the tech-stock boom, to less than 4.00 dollars this year.

With his partner China Netcom, Li is offering existing shareholders 4.50 dollars for each share in the buyout move.

The SFC started its investigation after local investor activist David Webb, often a scourge of the city's finance establishment, said he had been tipped off about the donations to Fortis agents in return for voting backing the deal.