Lau drops Chinese Estates buyout

PUBLISHED : Wednesday, 16 May, 2007, 12:00am
UPDATED : Wednesday, 16 May, 2007, 12:00am

Shares in Chinese Estates Holdings surged 8.87 per cent after the company said chairman Joseph Lau Luen-hung had withdrawn his HK$30 billion privatisation bid in the face of objections from other major shareholders.

Mr Lau, who owns 47 per cent of the developer, said yesterday that an unnamed major shareholder demanded HK$3 to HK$4 a share more than the undisclosed sum being offered.

The stock - which resumed trading yesterday after being suspended on Thursday due to the potential privatisation - rose to HK$12.76, the highest in 13 years.

The shares are up 35 per cent this year, outpacing the Hang Seng Index's 4.5 per cent gain, according to Bloomberg.

Mr Lau claimed he made the offer because he felt the company was being hemmed in by the demands of fund managers who own Chinese Estates shares.

'We are under pressure from those shareholders. We have different views on company policy. For example, the fund managers asked us to buy back shares at high prices,' he said. 'We want to have more flexibility through the privatisation.'

The Children's Investment Fund Management (TCI), an activist British hedge fund, bought 173.95 million shares, or 8.27 per cent of Chinese Estates, for HK$1.44 billion in March last year.

The fund retains a 7.86 per cent stake and is the second-largest shareholder.

Thomas Lau Luen-hung, the chairman's brother, owns a 6.64 per cent stake.

Hutchison Whampoa's Hutchison International is the fourth-largest shareholder with about 4 per cent.

Joseph Lau had planned to privatise the firm for more than HK$30 billion, including the cost of buying the remaining shares, taking over HK$9 billion debt, and assuming investment costs of Chengdu development projects.

Mr Lau believed the withdrawal of the privatisation would not affect the relationship between him and the shareholders.

Under the regulation, he cannot propose privatising the company for the next six months.

TCI, set up in 2003 by money manager Christopher Hohn, has bought large stakes in a number of local and mainland firms since the end of 2005, generally sending those shares surging once the announcement of the acquisitions were made.

The hedge fund is the largest shareholder of The Link Reit, owning 18.35 per cent of Hong Kong's first and largest publicly traded real estate investment trust.