Hong Kong appeals court blocks PCCW deal
HONG KONG — A Hong Kong tycoon’s controversial $2 billion effort to take over telecom firm PCCW was blocked by a court Wednesday after securities regulators claimed the deal was marred by vote-rigging.
The ruling by a three-judge appeals panel overturned a lower court’s decision OK’ing the buyout led by company Chairman Richard Li.
It was the latest turn in a corporate drama that has dominated headlines in this Asian finance capital — and a blow to Li, the son of one of Asia’s richest men, billionaire tycoon Li Ka-shing. The ruling frustrates his latest attempt take private or sell part of a telecommunications firm that never lived up to its aspiration as a regional high-tech powerhouse.
Since its approval by shareholders in February, the deal has been dogged by criticism Li was dramatically undervaluing PCCW, the territory’s major landline operator, and claims the vote was rigged to inflate support.
Hong Kong’s securities watchdog, the Securities and Futures Commission, opened an investigation and sought to halt the deal in a high-profile case of court intervention by the territory’s regulators.
The commission maintained the vote was unfairly manipulated after about a half a million PCCW shares were doled out to employees of Fortis Insurance Company (Asia) Ltd. in an effort to sway votes. An executive who distributed the shares has ties to Li’s associates.
A court ruled in favor of Li and his buyout team earlier this month. It said there was lack of evidence to support the regulator’s case and that the practice of splitting votes wasn’t strictly illegal.
But regulators, saying they didn’t oppose the deal but objected to the lower court’s decision backing vote splitting, quickly appealed.
In six days of hearings leading to Wednesday’s decision, appeals judges repeatedly questioned the rationale behind the effort to take PCCW private. They criticized the plan as an “outrageous” attempt to squeeze out small shareholders and called the buyout price “rock-bottom”
Small investors, many of them who sunk part of their life savings into PCCW shares, were given three days to air their objections.
The appeal court’s decision was given verbally in court, with its full judgment yet to be released.
PCCW issued a statement say it was “disappointed” by the ruling and would comment more after reviewing the judgement.
Securities regulators, too, were waiting on the judgement, but would continue to work to “ensure the minority are fairly treated in accordance with the law,” said Martin Wheatley, the SFC’s chief executive.
The deal, worth 15.9 billion Hong Kong dollars ($2.04 billion), would pay stockholders HK$4.50 for each share, giving Li and his buyout partners majority ownership.
Shares in the company, which once traded over HK$100 during the dot-com boom, have been suspended.
AP Writer Dikky Sinn contributed to this report.