Li agrees to sell controlling stake in PCCW

11 Jul 2006

Richard Li plans to step down as chairman of Hong Kong’s largest telco PCCW later this year after he yesterday agreed to sell most of his controlling interest to Hong Kong-based financier Francis Leung in a deal worth HKD9.16 billion (USD1.179 billion). Under the agreement Li’s 75%-owned Pacific Century Regional Developments will sell its entire 22.7% stake in PCCW to make the former Citigroup banker the largest shareholder in the company. Li will retain a privately held 3% stake. Chinese business newspaper The Standard reports that Leung’s acquisition is priced at HKD6 per share, which represents an 8.1% premium compared to PCCW’s Friday closing share price of HKD5.55. Leung, who left Citigroup on 7 July, is required to pay an initial deposit of HKD500 million, followed by a further HKD2.248 billion before the end of November. The remaining 70% of the asking price can be deferred for as long as 18 months.

Li announced that he was selling the bulk of his shareholdings in PCCW to Leung because of difficulties in pushing through an asset sale. ‘Of course an asset sale would have realised more shareholder value but I can do only so much,’ he said yesterday. The agreement followed offers last month from Australia’s Macquarie Group and US-controlled TPG Newbridge to acquire PCCW’s core telecoms and media assets for a price in the region of HKD60 billion. However, both suitors were unable to secure the backing of state-owned China Netcom, PCCW’s second largest shareholder with 20%, which wants the company to remain in local hands. Leung’s offer, which values PCCW at HKD40.4 billion, is much lower than the offers by either Macquarie or Newbridge, and is structured as a simple equity acquisition, rather than as a purchase of PCCW assets.

Hong Kong, HKT/PCCW (incl. CSL), PCCW Group