What is the deal here?
Many moons ago, Mr Richard Li, son of Mr Li Ka-shing, presented his intention to sell the 22.64% stake in PCCW, a telco listed in Hong Kong.
There were suitors with big monies but they were turned down. Why? It was rumoured that IT does not favour strategic assets such as telcos to go under control of foreign owners.
Then some recent months ago, I read that Mr Richard Li has agreed to sell the stake in PCCW to financier, Mr Francis Leung.
The 22.64% stake is held under Pacific Century Regional Developments (PCRD), a company listed in Singapore.
Why and how would a financier want to own a telco with a price tag in the billions?
On 14 Nov 2006, Business Times reported that the 22.6% will be taken as follows
- 12% by 2 charitable foundations of the elder Li,
- 8% by Spanish telecoms giant Telefonica and;
- the remaining 2.64% goes to (guess who?) Mr Francis Leung.
Given the line-up, has the answer presented itself? It doesn't look that Mr Leung is the intended ultimate buyer.
What will be interesting in days to come?
The sale is conditional upon approval from shareholders of PCRD. As Mr Li is a substantial shareholder of PCRD, the approval would be a simple technicality to be executed until the Singapore Exchange (SGX) enters into the story.
SGX banned the younger Li from voting on the sale of his stake after it was unable to get assurances that parties connected to him - including his father - were not involved in the sale.
A significant part of the deal's future now lies in the hand of minority shareholders of PCRD as they convene for an EOGM on 30 Nov 2006.
Conclusion
Why must Mr Richard Li sell PCCW? Is PCCW no good and will thus hurt PCRD in future? Then how come got suitors ha? How come got to get daddy involved if it is no good? So PCCW must be good. Then why sell? But daddy already got its own telco business in Hutchison Whampoa.
Can someone explain to me for my academic understanding, please? Good nite.
P/S - I am not a shareholder of PCRD and PCCW.
3 comments:
PCRD's independent directors recommend PCCW sale as per today's papers.
Opinion comes two weeks before PCRD's crucial EGM.
On what basis?
The sale was on 'normal commercial terms and is not prejudicial to the company and its minority shareholders'.
Dear Egar
Thanks for putting this blog. I can hardly find anyone to discuss this with. I guess many people shun away from PCRD.
I had been a shareholder for a long time and my nick is "honest" in shareinvestor.com
The "minority" shareholders are many broking houses holding the shares like our local houses and Merril Lynch, Morgan stanley,etc. And also Chip Lian Investments. Their average cost is of course much higher than the current price of PCRD, unless they had bought in earlier to average down their cost. After calculating the returns from PCCW sale, it will still be below cost I think. So that is why the objections and asking for higher price.
Of course it will be better to sell PCCW to realise the value of the holding company PCRD. That is for a longer term investment.
Why do Francis Leong and partners want to buy? Because PCCW is traded way below value. They can't bring up the value without a big stake first. So Francis Leong's investment vehicle is going to own a big stake first and avergae down their cost with market shares. I bet PCCW had been bought from open market by investments linked to them.
Trade with care. Buy for long term gains.
Dear all,
The deal in the current form is dead for now.
But somehow I feel it is not the end.
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