Macquarie refocuses on PCCW

Macquarie Bank is interested in joining a consortium being assembled to buy a controlling stake in PCCW, Hong Kong’s leading telecommunications operator. This is despite having its original approach to the company rebuffed.

People with knowledge of the negotiations said Macquarie was talking to Francis Leung, who last month agreed to buy control of PCCW for HK$9.2bn ($1.2bn). It is interested in taking a minority stake in his acquisition vehicle.

Macquarie declined to comment on Monday.

The revelation will surprise those who believed the Australian investment bank would not pursue its interest in PCCW because of the manner in which Mr Leung gained control of it.

In June, Macquarie and TPG/Newbridge, a US buyout fund, had each offered more than $7bn to acquire the core assets of PCCW. Other parties were expected to join the bidding war.

But it is widely believed the asset sale was blocked by Beijing on nationalistic grounds. State-controlled China Netcom, which owns 20 per cent of PCCW, declared its opposition to any sale to foreign buyers.

Richard Li, PCCW chairman, controlled the company via a 23 per cent stake owned by his Singapore-listed holding company.

To leave PCCW, Mr Li sold the 23 per cent stake to Mr Leung and allowed the payments to be spread over nearly two years.

Mr Leung, a veteran investment banker, is regarded as an unlikely telecoms tycoon and his emergence surprised many in Hong Kong as he does not have the personal wealth to buy the stake. But Mr Leung has been in discussions with parties interested in joining his consortium and has promised to disclose his backers when he pays his first instalment later this year.

One person familiar with the situation said talks between Macquarie and Mr Leung were at an early stage. Both sides appear to be awaiting the outcome of the possible privatisation of Mr Li’s Singapore holding company before making any further move.

Mr Li owns 75 per cent of Pacific Century Regional Developments, the holding company.

In a separate development earlier this year, TPG/Newbridge offered to buy shares held by minority investors and to help Mr Li take the company private.

Shareholders in Singapore will vote on the offer in a few weeks.

The person familiar with the situation said: “Macquarie clearly still believes that PCCW is an asset worth co-owning in some way although everyone involved in this now accepts that any deals will have to be friendly and acceptable to Beijing.”