Hong Kong Court Delays PCCW Buyout

HONG KONG (Reuters) – A Hong Kong Court deferred a hearing on Tuesday on a $2.2 billion plan to take dominant telco PCCW Ltd (0008.HK) private, giving the securities watchdog time to provide evidence on a probe into alleged vote buying.

Trading in PCCW shares was earlier suspended ahead of a High Court hearing on the controversial plan, raising concerns the bid to take the company private, orchestrated by PCCW Chairman Richard Li and his Pacific Century Regional Developments (PCEN.SI) (PCRD), could be further delayed.

The court hearing, which had been postponed from Feb. 17, had been expected to approve the company’s capital reduction plan and set a date for a final hearing to formally approve the deal, which shareholders backed earlier this month.

PCCW shares closed at HK$3.99 on Monday, 11 percent below the buyout offer of HK$4.50.

Brokers said the court’s decision cast doubt on whether the deal will go through. “It shows the market is reserved about the privatisation plan, otherwise we will not see such a big discount on the stock,” said Francis Kwok, Bright Smart Securities.

Under the privatisation proposed by Li and PCCW shareholders, PCRD and China Netcom, the deal has to be completed by April 23, or become invalid.

“There’s an increasing risk the deal might not go through,” said Allan Ng, an analyst at BOC International.

The SFC said the next court hearing had been set for two days starting April 1.

VOTE ALLEGATIONS

The Securities and Futures Commission (SFC) seized voting records after the Feb. 5 shareholder meeting and had sought to intervene and be heard at the court hearing on Tuesday.

Shareholder activist David Webb told regulators last month he had received an anonymous email alleging PCCW shares were offered to insurance agents in exchange for supporting the buyout offer.

In November, the bidders offered to buy PCCW for HK$4.20 per share, or HK$15.94 billion ($2.06 billion). They sweetened the offer in December to HK$4.50 to win over angry minority investors who felt the price should be much higher.

The court gave the SFC 21 days to provide evidence from its investigation, and granted PCCW and related parties another seven days to prepare a defence.

“We will submit the evidence we gathered to the SFC,” Ronald Chan, a representative of PCCW’s minority shareholders, told Reuters after the hearing.

PCRD denied any knowledge of or involvement in anything improper. “We believe our offer was attractive for PCCW minority shareholders and were pleased it was supported by shareholders holding over 82 percent of shares voted, representing 1.3 billion shares,” it said in a statement.

China Netcom has this year merged with China Unicom’s (0762.HK) parent as part of a government-led industry restructuring.

By Alison Leung and Joanne Chiu
(Reporting by Parvathy Ullatil, Editing by Ian Geoghegan)