US blocks AsiaSat plans to go private
Jeff Pao and Tim LeeMaster
Buyout raises concern over technology transfer
Asia Satellite Telecommunications Holdings, which operates three satellites covering the region, said the United States Department of State had refused to approve a privatisation plan proposed by AsiaCo, a joint venture between China's State Council-controlled Citic Group and GE Capital Equity Investments of the US.
Asia Satellite made the announcement in a statement filed with the Hong Kong stock exchange less than two hours before its shareholders were to vote on the privatisation yesterday morning, saying the meeting was 'indefinitely adjourned'.
'The State Department's disapproval was due to national security reasons, as Citic will keep a 50 per cent stake in the company after the privatisation,' said an analyst. 'The US government is afraid of the transfer of any satellite technology to China which may threaten national security.'
On February 14, AsiaSat's shares rose 25.5 per cent to HK$17 after it said Modernday, since renamed AsiaCo, agreed to pay HK$2.3 billion or HK$18.30 per share to take the satellite company private.
Citic, which reports directly to Beijing, has a 34.8 per cent effective interest in AsiaSat. GE Capital - a General Electric subsidiary - owns a 34.1 per cent stake, bought in a deal finalised on March 29 from Luxembourg-listed SES, the world's largest satellite broadcaster, by giving up its own 19 per cent stake in SES.
If AsiaSat is privatised as planned, Citic and GE will each own 50 per cent of the company. AsiaSat will then become a private company, which means it does not have to comply with requirements on disclosures and independent shareholder rights for all Hong Kong-listed firms.
The GE transaction, which was first announced on the same day as the privatisation, triggered a mandatory general offer for AsiaSat's minority-owned shares at HK$16 each, the company said.
'The mandatory offer is priced lower [than the stock trades now] so I would be surprised to see shareholders approve it; and at any rate you would still be left with the same issue with the State Department. We are back to the status quo,' a banker said.
Completion of the privatisation plan was subject to certain conditions, including approval by the State Department pursuant to the US International Traffic in Arms Regulations, according to the company's February announcement.
An AsiaSat spokesman would not elaborate on the reason for the State Department's disapproval. GE Capital and the State Department would not comment on the deal.
According to a hedge fund manager, other substantial shareholders - Harris Associates, Aberdeen Asset Management and Commonwealth Bank of Australia - were not keen on the offer and any one of them could have voted down the deal.
AsiaSat would have been delisted from the exchange if the offer had been accepted by 75 per cent of minority shareholders.
The vote was planned at a special general meeting scheduled for 10.30am yesterday but was cancelled at 8.42am.
AsiaSat shares, which were suspended from trading on April 19 pending the vote, last changed hands at HK$17.54. According to the announcement yesterday, the shares will remain suspended.
The company said it planned to issue another statement today.
Asia Satellite Telecommunications, Asia's first privately own regional satellite operator, set up in 1988 to provide services for move than 50 countries across the Asia-Pacific region
launched from Xichang, Sichuan province, on April 7, 1990
launched from Xichang on November 28, 1995
launched from the Baikonur Cosmodrome, Kazakhstan, on March 31, 1999, to replace AsiaSat 1
launched from Cape Canaveral, Florida, on April 11, 2003
due for launch from the Baikonur Cosmodrome, Kazakhstan, in 2009 to replace AsiaSat 2