Questions raised over OOIL's share repurchase
Shareholders must decide next month whether to approve the transaction
Orient Overseas International's (OOIL) HK$460 million repurchase last Thursday of shares held by Li Ka-shing-controlled companies raises a number of tantalising questions, coming as it does just months after the decade-long link between Mr Li and Chief Executive Tung Chee-hwa's family shipping and real estate firm was first forced into the open.
Mr Li's companies bought US$22.5 million worth of convertible redeemable OOIL preference shares in a private deal in 1992, and converted them into a 5 per cent stake in the shipping company. Mr Li later expanded his stake in OOIL to more than 9 per cent.
But Mr Li's 9 per cent holding in OOIL was only disclosed in April after Hong Kong Exchange and Clearing lowered, from 10 to 5 per cent, the threshold above which all stakes in listed companies must be declared.
Did OOIL want Mr Li out because of the problems he has encountered in the United States and India, where politicians are suspicious of his ties to Beijing? Or did Mr Li wish to disassociate himself from Mr Tung, whose political future is looking rockier than ever before?
However, OOIL and Hutchison Whampoa both denied any political motive for the purchase. Senior management sources close to the transaction insisted it was purely commercial.
Referring to Mr Li's persona non grata status in certain China-baiting circles on Capitol Hill, a senior source at OOIL said: 'We have never been involved in any deal or situation where Mr Li's status as a shareholder was a factor.'
Mr Li's bid for Global Crossing was successfully scuppered by US businessmen and politicians who opportunistically argued that a transfer of the bankrupt firm's communications network to Mr Li would be contrary to America's national security interests.
OOIL group financial controller Fung Kit-man said the deal was in the best interest of shareholders, three-quarters of whom must approve the purchase next month.
'We took the opportunity to buy back the shares in bulk since we have surplus cash,' Mr Fung said. 'If [Mr Li's companies] had off-loaded that many shares into the open market it would have forced the share price downwards.'
OOIL's decision to cancel the purchased shares brings the Tung family's interest to 80.6 per cent and the public float to 19.4 per cent - below the 25 per cent minimum. OOIL said that upon receiving shareholder approval, a deal would be made to restore the 25 per cent public float as per exchange rules.
According to OOIL's declaration to the stock exchange, the deal was initiated by Mr Li's companies.
OOIL group financial controller
Li's links
In 1992 Li Ka-shing bought OOIL preference shares and converted them to a stake in the firm
His holding was disclosed in April after changes to HKEx disclosure rules
