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HK Court blocks Li's PCCW privatization

(Agencies)
Updated: 2009-04-22 20:26

A Hong Kong appeals court on Wednesday ruled in favor of the city's securities watchdog in its effort to block the $2.2 billion privatization of phone company PCCW Ltd in a deal led by its largest shareholder, Richard Li.

The ruling overturns an April 6 High Court decision in favor of the deal and casts the privatization bid into uncertainty.

"The company is disappointed at the Court of Appeals' decision, given the clear findings and reasons set out for the April 6, 2009, judgement of the High Court," PCCW said in a statement.

Related readings:  PCCW 2008 net profit falls 15 percent  PCCW share-split questioned at CoA  PCCW buyout bid secures green light  PCCW denies shady bonus handouts

The company, whose privatization plan has a Thursday deadline, said it would await the court's judgement before commenting further. The Securities and Futures Commission has argued that PCCW shares were split on the eve of a shareholder vote on the deal in order to manipulate the outcome.

Hong Kong's High Court had earlier found nothing irregular and no strong evidence of coercion of minority shareholders, who had accepted the offer from Li's group of HK$4.50 per share, sweetened from HK$4.20.

A group of minority shareholders welcomed the court ruling outside the court house. "I am a Hong Kong person, and I am ardently in love with Hong Kong," sang one of the PCCW investors in jubilation, while saying social justice had prevailed in the city.

The privatization is being made through Li's Pacific Century Regional Developments and Netcom of China Unicom group.

"We still don't know if PCCW will appeal this decision. That is another overhang on the stock," said Timothy Chan, analyst with CLSA, which has a sell rating on the stock.

"There is a lot of uncertainty at this point, and when it starts trading some shareholders may hold on to it until they get more clarity," Chan said.

Shareholder activist David Webb, who first alerted the SFC to possible vote-rigging in the deal, hailed the court's ruling.

"This is a good day for corporate governance in Hong Kong, and we need many more," he said. PCCW stock, which last traded at HK$4.12, has been suspended since the start of the appeal hearing on April 16.