PCCW to go private
Its bid to sell its share of PCCW having been killed off by the current financial crisis, the Richard Li-controlled Pacific Century Regional Developments now wants to take the Hong Kong telco private. PCCW owns the Now TV IPTV platform.
A joint bid with China Network Communications offers HK$4.20 a share for the 52.42% that the companies do not own. That equates to a cash offer of HK$15,491 million, of which HK$11,505 million will be paid by PCRD’s Starvest and HK$3,986 million by Netcom.
At the close of the transaction, PCRD companies will hold 66.67% of PCCW and Netcom 33.33%.
The offer price represents a premium of 53% over the closing price of HK$2.75 a PCCW share when the company was last traded on Hong Kong’s stock exchange. It also values the entire company at HK$28,444 million.
In the offer document, PCRD said: “Given the relatively low liquidity and persistently weak performance of the PCCW shares, PCRD believes that access to the equity capital markets does not provide PCCW with an attractive fund raising avenue, and that the costs and management resources associated with the maintenance of PCCW’s listing status are not warranted.”
PCRD added that with PCCW representing the majority of its assets and with its own shares underperforming PCCW’s, that has reflected a holding company discount. PCRD believes that effect will be reduced once PCRD reassumes its position as controlling shareholder of PCCW.
While it is “the intention of both PCRD and CNC for the PCCW Group to maintain its
existing business upon the successful privatisation of PCCW”, the companies also said they would “assess any opportunity that may arise from time to time involving the business and/or assets of the PCCW Group (including a possible listing of any of its telecommunications services, media and IT solutions businesses).”
That points to a plan in the longer term to sell PCCW off, which Richard Li has been trying to do for some time. An earlier attempt to sell PCCW to TPG and Macquarie was stopped by China which has been worried over foreign takeovers of infrastructure assets.
China Netcom and PCRD said in a statement that advisors HSBC and ABN AMRO are satisfied that sufficient financial resources are available to fulfill the deal.