PCCW ready to privatise iLink unit
The telecoms heavyweight wants to reabsorb, at a deep discount, the firm it listed 29 months ago
PCCW is poised to make private the Internet data centre unit it listed 29 months ago at a deep discount to its initial public offering price.
In yet another move intended to tidy up the firm's venture portfolio, which remains from the Internet heyday, Hong Kong's dominant telecommunications carrier confirmed it planned to buy the 52.1 per cent it does not own of iLink Holdings, a direct competitor to the company's wholly owned data centre brand Powerbase.
Shares of Growth Enterprise Market-listed iLink were suspended yesterday because it had received notification of its parent's intended privatisation.
The proposal comes at a time when the company's shares are down 92.18 per cent, at two cents, from their IPO price of 25.6 cents.
The company raised $140.8 million in March 2001 by selling new shares but the market value of iLink as of yesterday was about $105 million.
Sources at PCCW and iLink suggested the privatisation was good for both sides because it helped realise value for their shareholders.
An iLink spokesman said: 'Our company has always been very thinly traded, partly because our investors were mainly strategic or institutional ones.'
Shares in iLink, which has not had a single share traded in the past 30 days, are heavily concentrated with very little public float.
PCCW owns 47.9 per cent of iLink, while chief executive Billy Tam Wai-keung has a 20.53 per cent stake.
Strategic investors Henderson Investment and Dell Ventures own 8.89 per cent and less than 5 per cent, respectively.
For PCCW, a privatisation will not only help remove a direct competitor, it may also benefit financially.
As of June 30, iLink was reported to have cash of $184 million, equivalent to about 3.5 cents per share.
The company has never shown a profit since it began business in 1999 but its losses are gradually coming down.
In the first half, it incurred a $21.78 million loss, down 54.24 per cent year on year.
ILink, which operates state-of-the-art centres in major Chinese cities, has been affected by massive industry oversupply, with its rivals pouring in millions of dollars in the late 1990s.
A head of research at a local brokerage said the transaction would have little financial impact on PCCW even it offered a hefty premium to buy out the minority stakes in iLink.
PCCW shares yesterday were down 1.16 per cent at $4.15.
