The bidding war over Hong Kong's largest phone operator PCCW,
which has been ongoing for a month, came to an end Monday when its
controlling shareholder Richard Li sold a 23-percent stake to a
high-profile local banker.
The mega-deal, worth HK$9.16 billion (US$1.17 billion), valued
PCCW at HK$6 (77 US cents) per share which is an 8 percent premium
on its closing price of HK$5.55 (71 cents) on Friday.
Li retains a 3 percent stake in the firm in which China Netcom
Group Corp, the mainland's second-largest fixed-line operator,
bought a 20-percent stake last year for US$1 billion.?
Francis Leung, who stepped down this year as chairman of
Citigroup's Asia investment banking arm, beat two overseas rivals
with the bid -- Australia's Macquarie Bank and the Asian arm of US
buyout firm Texas Pacific Group.
The two had previously offered US$7.3 billion and US$7.55
billion for the main phone and media assets of PCCW.
Dubbed the "Godfather of Red Chips" Leung is credited with
arranging the Hong Kong listing of some big mainland interests in
the 1990s. Red chips are Hong Kong-listed mainland companies with
at least a 20-percent stake held by the state or state-owned
entities.
PCCW "has a unique position in Hong Kong's infrastructure
network," Leung said at a press conference last night. "This is a
long-term investment."
Analysts said it's a wise move for Li to exit the telecom sector
which is highly competitive and delivers slim profits.
"I think he made the right decision," said Andes Cheng, an
analyst with Hong Kong's South China Brokerage Co Ltd.
Leung said he would team up with China Netcom to explore the
mainland market. When he was with Citigroup in 2004 he handled the
listing of China Netcom Group's Hong Kong arm.
Li said he would personally earmark HK$1.38 billion (US$177
million) for minority PCCW shareholders in special dividends. This
translates into HK$0.33-HK$0.38 (4.2-4.9 US cents) per share and a
move analysts say would be part of the reason why PCCW shares will
rise after they resume trading today.
"It's not the 100 percent outcome that I'd hoped for but this is
the best we can do," Li told a press briefing. He declined to take
questions.
PCCW shares increased about 10 percent until Friday after
Macquarie Bank's offer was made public on June 20. Texas Pacific
joined the bid a few days later.
Opposition to Texas Pacific and Macquarie, Australia's largest
investment bank, highlights China's sensitivity towards overseas
ownership of industries the government view as strategic, observed
some analysts.
"Communication is considered a very strategic asset," said
Francis Lun, general manager at Fulbright Securities Ltd.
(China Daily July 11, 2006)