PCCW Group Managing Director Alex Arena arrives at the Court of Appeal for the second day of hearing on the company's privatization bid yesterday.

HONG KONG: A group of minority shareholders of PCCW Ltd questioned at a court hearing Friday the fairness of the splitting of the firm's shares, which are said to have facilitated majority shareholders' approval of a proposal to take the telecom giant private.

They also asked the judge to allow a re-vote by PCCW shareholders on the privatization bid.

Barrister Daniel Fung, representing three minority PCCW shareholders, told the Court of Appeal that "it is unacceptable if share-splitting has benefited some parties."

He said PCCW's minority shareholders did not use the same tactic.

A minority shareholder, surnamed Chan and not represented by Fung, told the court the proposed privatization of PCCW would not have won majority shareholder approval in February were it not for the splitting of PCCW shares.

Minority PCCW shareholders, together with securities regulator the Securities and Futures Commission (SFC), have been arguing at the Court of Appeal that a High Court ruling early this month, which favored the privatization, was unfair to minority shareholders.

They claimed voting on the proposed privatization during a shareholders' meeting in February had been manipulated through share-splitting.

Assistants of lawyers representing the Securities and Futures Commission push a cart-full of documents into the Court of Appeal yesterday. CNS

On Thursday, the SFC told the Court of Appeal that the proposed privatization of PCCW won majority shareholder approval in February only because of share-splitting.

Yesterday, the SFC, through lawyer Winton Poon, continued its presentation and provided further evidence in support of the claim that voting at PCCW's shareholders meeting in February had been rigged.

Poon told the court that the secretary of Francis Yuen, a business associate of PCCW majority shareholder Richard Li, had confirmed giving more than 500 PCCW shareholder proxy forms to Fortis Insurance (Asia) executive Lam Hau-wah, who is at the center of the alleged plot to rig the PCCW voting.

Poon said Lam distributed the proxy forms to about 500 Fortis insurance agents and collected them shortly after securing the agents' authorization signatures. The swiftness suggests it was an organized action, he said.

The SFC earlier told a High Court judge that Lam bought 500,000 PCCW shares on Jan 3 - a month ahead of the voting for the privatization deal in February - and distributed some of them to his subordinates as "bonus" after phone calls with Yuen.

Justice Anthony Rogers yesterday took note of the point about the 500 proxy forms, questioning Yuen's previous statement that he did not know about Lam's plan to give out free PCCW shares to his subordinates at Fortis.

Poon told the court yesterday that the SFC has the responsibility to safeguard shareholders' interest in order to maintain Hong Kong's status as an international financial center.

He said that it would not be a rare case for a court to disapprove a privatization deal when unfair practice is found, citing some previous similar cases.

Meanwhile, Justice Rogers said he recognized the difference between the interest of long-term shareholders and that of short-term shareholders, who support the buyout.

(HK Edition 04/18/2009 page2)