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Monday, November 23, 
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Dealwatch: PCCW

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Published November 13, 2006 at 3:32 PM
pccw.gifAt long last, Hong Kong's best-known investment banker Francis Lueng revealed the structure Sunday, Nov. 12, of his $1.17 billion bid for one of Hong Kong's largest communications conglomerates, PCCW Ltd. Li Ka-Shing, a local tycoon and longtime friend to Lueng, as well as Spain's Telefónica SA are in the ring with the investor on his quest for control of 22.65% of the Hong Kong telecom.

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Through foundations, Li will buy a combined 12% stake from Leung for about $623 million, and Telefónica will pay $415 million for an 8% stake. Leung will retain a 2.65% stake.

FAMILY TIES

Leung has sought to acquire the stake from Singapore's Pacific Century Regional Developments Ltd., which is 75%-controlled by Richard Li, Li Ka-Shing's son. Whether the bid is successful depends on the remaining 25% of shareholders.

The Singapore Stock Exchange launched an inquiry into the bid, having found links between Leung and the elder Li, which it considered too close. Richard Li was barred from voting on the disposal and minority shareholders are poised to vote on the deal before the end of November, though a date has yet to be announced.

STICKING CLOSE TO HOME

In June, it looked like PCCW, Hong Kong's largest communications conglomerate, was heading down a long, winding road to sell its telecommunications and media assets, and eager bidders Macquarie Bank Ltd. and Texas Pacific Group emerged to vie for control. But PCCW walked away from the prospective buyers in late July after Leung, first unveiled plans to take a controlling 23% stake in the.

  • PCCW turned away its international suitors July 25, succumbing to pressure to keep one Hong Kong's largest assets in Chinese hands.
MAKING WAVES

PCCW tapped Lehman Brothers Asia Ltd. as a financial adviser to the company in relation to a possible sale, but said it wasn't appropriate at the time to disclose more without detailed terms to share.

  • China Network Communications Group Corp., a 20% PCCW shareholder balked at the divestiture plan in late June, but the seller responded saying a deal would be structured as an asset sale, not one in which company shares would change hands.
    • The attack raised concern that Beijing-based China Network could put forth a counter offer.
  • Weeks later, investment banker Francis Leung jumped into the fray and announced a deal Monday, July 10, to pay $1.2 billion for a controlling 22.7% stake in the carrier. Leung plans to retain a 3% direct stake in PCCW and few analysts believe he is acting alone. He sidestepped a direct inquiry at a press conference, but did acknowledge he might invite other Hong Kong investors to join in a company he set up for the deal.
  • Macquarie might be able to count a News Corp. unit in its camp. Hong Kong-based Star Group Ltd. confirmed the two were in team-up talks at the end of June.

TAKING STAKE

Last year, PCCW made a strategic move by re-entering the mobile market in Hong Kong through its acquisition of a majority, 79.5%, stake in Sunday Communications Ltd. The company launched an outright bid for the company in December 2005, which was blocked by minority shareholders. In October, PCCW bid for the company's main assets for $248.7 million. --Basdeo Hiralal

Dealwatch executive summary
The Date
The Action
11.12.06 Leung's co-bidders are Li Ka-Shing and Telefónica.
11.08.06 Rumor has it Telefónica could buy up shares. PCCW shares rise accordingly.
10.04.06 PCCW bids for Sunday's main assets.
9.21.06 Pacific Century Regional Developments Ltd. suggests Li had a hand in funding Lueng's bid.
7.25.06 PCCW walks away from talks with international suitors.
7.21.06 PCCW shareholders call for an indpendent valuation of the telecom.
7.11.06 It is unclear who will take the reins at PCCW.
7.10.06 Leung buys up 22.7% of PCCW with $1.2 billion.
6.29.06 News Corp.'s Star Groups says it has discussed a possible team-up with Macquarie.
6.21.06 PCCW defends its planned asset sale.
6.20.06 China Network Communications Group raises concern over PCCW's sale plan.
6.20.06 PCCW's shares shot up as Macquarie emerged in reports as a bidder.
6.2005 PCCW takes majority stake in Sunday Communications.
1.20.05 PCCW swaps $1 billion for 20% of China Netcom.
Source: The Deal
 

 

 



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