Mr Richard Li and PCCW - Episode 3

engine was running while the driver was yakking away over his coffee

What is the deal?
Mr Richard Li and China Network Communications Group intend to take PCCW private by buying any remaining shares they do not own at HK$4.20 a share. Total purchase consideration - HK$14.9 billion.

PCCW, Hong Kong's biggest phone carrier, will pay a cash dividend of about HK$16.9 - 17.4 billion to Mr Li's Pacific Century Regional Development (PCRD) and China Network within 20 days after the purchase date.

That is about HK$2.7 billion more to be received by Mr Li's and China Network against the buyout price tag.

Couple of hitches

• The intended dividend payout is 13 times more than 2007's.
• 2007's dividend payout is about 74% of 2007's profit.
• PCCW's net debt as at June 2008 - HK$23.2 billion.
• So how does PCCW intend to find the money to pay the intended dividend? PCCW intends to borrow at a relatively high interest from 20 banks to pay it.

Sharholding structure of PCCW before the buyout:-

• Mr Richard Li (in his own name) - 28.3%
• PCRD Singapore - 22.5%
• China Network - 20%

Shareholding structure of PCCW after the intended buyout:-

• Mr Richard Li and PCRD - 66%
• China Network - 34%

So what would be the impact to PCRD's minority shareholders?

Background info
In 2006, Mr Richard Li tried to take PCCW out of PCRD by proposing buyers in the form of companies and parties deemed related to Mr Li Senior and a ex-Citibanker Mr Francis Leung. http://investingwithedgar.blogspot.com/2006/11/richard-li-his-dad-and-pccw.html