Source:
https://scmp.com/article/626270/pccw-offers-hk264b-buy-out-pcpd

PCCW offers HK$2.64b to buy out PCPD

PCCW, which owns 61.53 per cent of Pacific Century Premium Developments (PCPD), plans to pay HK$2.64 billion for the remaining shares of the developer of the Bel-Air luxury residential development at Cyberport in Pok Fu Lam.

The telecommunications firm, controlled by Richard Li Tzar-kai, said it planned to pay HK$2.85 a share for the outstanding 926 million shares or 38.47 per cent of PCPD due to its share-price underperformance and thin trading volume.

Shares of PCPD have lagged both the Hang Seng Index and the Hang Seng Property Index since PCCW injected its assets, including Cyberport development rights, into listed shell company Dong Fang Gas Holdings. It was subsequently renamed PCPD in 2004.

The offer price represents a 26.1 per cent premium over HK$2.26, the last closing price of PCPD before the suspension of trading. But it is a 5.9 per cent discount to its unconsolidated net asset per share value of HK$3.03 as of June 30 last year.

Analysts said the deal was not seen as attractive since it was priced at a discount to its net asset value.

It was uncertain if the deal would be approved by minority shareholders. The top six institutional investors of PCPD already hold about 30.5 per cent in PCPD, according to Bloomberg data.

The property firm closed up 25.22 per cent at HK$2.83 after the stock resumed trading at 2.30pm yesterday. PCCW rose 0.45 per cent to HK$4.45.

'[PCCW] is paying a price which only reflects the current value of PCPD,' said Castor Pang Wai-sun, a strategist at Sun Hung Kai Financial.

The value of the latest phase of the Bel-Air development had not been reflected in the deal, Mr Pang said.

Upmarket residential prices are expected to increase 30 per cent this year, according to analysts.

Earlier, PCPD unveiled plans to build a ski resort development in Hokkaido, Japan, and a golf-hotel-residential project in Phuket, Thailand.

PCCW was attracted by the sound cash position of PCPD, according to the latest research report released by Credit Suisse yesterday. It said PCPD was in a slight net cash position, which should increase after the full completion of Bel-Air in the middle of the year and Pacific Century Place, an investment property in Beijing.

If the privatisation failed, PCCW could try to buy the assets of PCPD, which required a lower approval rate, the investment bank said.

According to PCCW's announcement, the privatisation offer requires the approval of at least 75 per cent of PCPD's minority shareholders and not more than a 10 per cent minority vote against the resolution.

The real estate unit is trading at 5.63 times its 2006 earnings, the second-lowest ratio of Hong Kong's 50 largest publicly traded property developers, according to Bloomberg data.