Wong's Kong King chairman won't raise offer
David Webb says he will block buyout unless price is improved
Wong's Kong King International said its chairman Senta Wong would not raise the offer to buy all the company's assets despite the threat by major shareholder David Webb that he would block the deal unless it is improved.
Mr Wong has offered to pay HK$1.17 billion to buy the entire operating assets of the electronic equipment maker.
Wong's Kong King will then distribute all the sales proceeds to independent shareholders at HK$1.65 per share in cash.
'We estimate that fair value of this stock to be around eight times trailing earnings, or over HK$3 per share,' wrote Mr Webb on his website. 'We would reject an offer below HK$2.50.'
Mr Webb, who owns a stake of more than 3.16 per cent in Wong's Kong King, is able to block the deal alone after the stock exchange plugged a loophole that had allowed telecommunications firm PCCW to bypass the privatisation rule.
According to the listing rules, a privatisation requires approval from more than 75 per cent of independent shareholders, as well as less than 10 per cent of them to vote against it, which PCCW failed to achieve when it attempted to buy out Sunday Communications last year.
PCCW then offered, and succeeded, to buy all of Sunday Communications' major mobile-telephone assets, a move that only required approval from a simple majority of shareholders.
Sunday Communications was later delisted after the asset purchase was complete.
Wong's Kong King's independent shareholders also voted down Mr Wong's privatisation offer last year, but when he offered to buy all the company's assets, the stock exchange asked that the deal meet the same approval requirements as in a privatisation deal.
Wong's Kong King yesterday said that an individual shareholder who holds 22.42 million shares, or a 3.16 per cent stake, in the firm could block the deal as that represented more than 10 per cent of independent shares.
Mr Webb, a shareholder activist and the editor of Webb-site.com, holds more than that level and said he would veto it at the shareholders' meeting on June 28.
He met Mr Wong and his financial adviser, Standard Chartered Bank, on June 1, trying to ask him to raise the offer but failed.
Wong's Kong King said yesterday that Mr Wong would not increase his offer price to more than HK$1.65.
Mr Wong also warned if his attempt to buy the firm's assets was rejected, shareholders might not be able to sell their stocks 'in the market at current price levels ... given the limited liquidity', and that he would not make another offer within 12 months.
Wong's Kong King's shares fell 2.47 per cent yesterday, closing at HK$1.58 after it was revealed that Mr Webb may block the deal.
The stock has climbed 48 per cent this year.