The future of PCCW was plunged into uncertainty as minority shareholders in its Singapore-listed parent voted on Thursday to block the $1.2bn sale of a controlling stake in Hong Kong’s leading telecommunications company.
“The sale price of PCCW was undervalued,” said James Hong, a shareholder in Pacific Century Regional Developments since the 1990s who spoke at Thursday’s stockholders’ meeting in Singapore. “Telecoms have a bright future. We should hold on and see if we get a better price later.”
The sale was opposed by 76.3 per cent of the votes cast by PCRD minority shareholders. Richard Li, who controls 75 per cent of PCRD’s shares, was barred from casting a ballot because his father, Li Ka-shing, was part of the consortium that would have paid HK$6 a PCCW share for PCRD’s 23 per cent stake.
That left PCCW’s fate in the hands of a highly fractured group of minority shareholders who control about a fifth of its share capital. Some took offence at Richard Li’s absence at the meeting. “He has never come to any of our meetings, which shows that he does not regard us as serious investors,” said an elderly woman.
Shareholders also were disturbed by PCRD directors’ remarks at the meeting that the board would decide later on how to distribute sale proceeds.
“I went into the meeting thinking I would vote for the sale because I thought we should close the matter and move on. But I changed my mind when the directors failed to tell us how they would use the proceeds from the sale. They didn’t give us enough information,” said Raymond Poh, who works for an energy company.
The rejection ruins months of delicate financial engineering by some of Asia’s most powerful businessmen and bankers, and raises questions over what Richard Li will do next with PCCW.
In a November 15 letter to Hong Kong’s legislature, he wrote that the deal “represents good value for [PCRD shareholders]”. But less than a week later he was quoted in a Hong Kong newspaper as saying he was “unsatisfied” with his father’s involvement – which negated Richard’s ability to vote and increased completion risk – and would be “happy” if PCRD shareholders rejected it.
Mr Li, whose reputation has taken a battering over what has turned into a public corporate soap opera, is understood to have been closely watching investors’ reaction in the run-up to Thursday’s vote.
Mr Li originally attempted to withdraw from PCCW last summer by selling its core assets to either Australia’s Macquarie Bank for $7bn or TPG-Newbridge, the US buy-out group, which in an attempt to match Macquarie’s bid also offered $7bn.
But both offers were blocked by senior Chinese officials and China Netcom, a state-controlled telecommunications group that owns 20 per cent of PCCW.
PCRD stood to recoup $1.2bn from the sale of its stake to a consortium headed by Francis Leung, a prominent investment banker in Hong Kong. The buying group also included Spain’s Telefónica.
ARN Investment Partners, a Singapore-based hedge fund that owns 0.05 per cent of PCRD, had been expected to accept the offer.
Anima, a Milan-based mutual fund, which has a variety of tiny stakes in PCRD, said on Wednesday that it planned to abstain.