Richard Li

Lai See

PUBLISHED : Saturday, 22 July, 2006, 12:00am
UPDATED : Saturday, 22 July, 2006, 12:00am


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The pccw saga according to simon murray, with shakespeare thrown in

The PCCW fiasco may have lasted no more than three weeks but the shrapnel is still to land. Why did chairman Richard Li Tzar-kai want to sell out in such a hurry? Who actually bought his stake?

To help answer some of these questions, Lai See asked Simon Murray, chairman of Asian corporate finance at Macquarie Bank - which submitted a $60 billion offer for PCCW - for a coffee and his insights:

Lai See: Mr Murray, you are in this deal and near the centre of it. Can you clarify what has happened and what may still happen?

Murray: I can tell you what has happened, as far as Macquarie is concerned. We were invited by Richard Li to make an offer for the PCCW assets. We were advised that there was very little time as several offers had been received and we were given a price indication that would be the minimum threshold for an offer to have any chance of being considered.

We made an offer 10 days later, or thereabouts, which was announced by Richard rather suddenly without any previous notification to us.

Lai See: Do you think that China is justified in getting involved and apparently being so opposed to the deal?

Murray: It depends whether or not there were, or are, any side agreements made when China Netcom bought in.

We have not been made aware of the existence of any such agreements with China, or China Netcom, or the Hong Kong government, that these assets could not be sold. Macquarie would never have intentionally upset China if they had known there was an agreement that the company should remain in Hong Kong hands.

I am a Hongkonger and have been here for 40 years, so unless this is a 'race' thing, I don't think we should be described simply as 'foreign' and be brushed aside as such. Frankly, that is not that great for Hong Kong Inc's image. We are proposing to invest up to $60 billion in Hong Kong and appear to be hearing that it is not welcome primarily because we are foreign to Hong Kong. In one of the most international cities in the world, I find that strange and disquieting.

Lai See: Why do you think Richard Li suddenly changed his mind and accepted an offer that was prima facie far less rewarding for him and his shareholders?

Murray: He was under pressure from several compass points - not the least his board, who appeared to be initially unaware of what he was doing and subsequently voted against the deal. Nevertheless, they may have to answer for it rather more clearly than they have done so far if they are to avoid a damaging class action lawsuit for perhaps not acting in the interest of their shareholders. There are quite a lot of fingers in this particular pie, most of which have their own interest at heart rather than Hong Kong's, or indeed the interest of the poor shareholders.

Lai See: Do you think Richard Li has got this wrong?

Murray: I think an analogy would be that he has pulled the pin out of a hand grenade in a crowded room and walked out and closed the door. On the other hand, although he could be accused of leaving the scene of an accident, he may not necessarily have been the real cause - in fact he could be the injured party.

Lai See: Do you think Francis Leung has got the wherewithal to do this deal?

Murray: The short answer is 'no', but he may have backers, or a backer, or Richard may be telling the truth when he says he has lent Francis the money to complete the deal. They do not appear to be in agreement on this point, unless Richard lent him 'some' of the money and Francis has 'some' backing - you can probably draw your own conclusions.

Lai See: Do you think Richard Li's father is involved?

Murray: I think you will have to ask him.

Lai See: Do you think this has damaged the reputation of Hong Kong or some of the parties involved?

Murray: I give you Shakespeare: 'The purest treasure mortal times afford is spotless reputation; that away, men are but gilded loam or painted clay.'

Lai See: So what next?

Murray: I think this has got a little way to run yet - it ain't over till the fat lady starts singing, as they say.