Francis Leung annoys investors with sale of Imagi's main asset

We understand there is some disquiet on the part of some shareholders in Hong Kong-listed Imagi International, which is chaired by the "father of the red chips" of years gone by, Francis Leung Pak-to.

Leung, it will be recalled, worked with Philip Tose at Peregrine Investments, which soared in the early 1990s before crashing and burning in 1998. In 2010, he bought into Imagi, which designs, develops, produces, distributes and licenses original animated products. In early 2011, he announced an HK$814 million deal to buy mainland brand manager Toon Express, which owns the character copyrights of Pleasant Goat and Big Big Wolf, which is a successful animation series. In September this year, Imagi said it was to sell its main asset, Infoport Management, which includes Toon Express, for HK$634.2 million.

Fund manager Fidelity, which owns about 8 per cent of Imagi, is, we are reliably told, unhappy that Toon Express was sold only two years after the purchase since it believed the company had considerable potential. It is also being sold for about 22 per cent less than its purchase price.

The other reason Fidelity is unhappy is that since Imagi will end up a cash shell after the transaction, there is a good chance it will be delisted, under stock exchange rules, unless it rapidly finds something else to invest its cash in.

The final source of the unhappiness is that rather than use an independent financial adviser to prepare a report on the best course of action for shareholders, the board in its wisdom opted to use a company called Luminary Capital, which is being paid HK$5 million and is 100 per cent owned by Leung. Not for nothing is this called a connected transaction. Shareholders feel that an independent firm would advise against the deal. In another sour note to the proceedings, the special general meeting to vote on the deal has been arranged at the unusually early time of 8.45am on October 21. Shareholders and observers are curious as to the urgency for the deal.

A leader for the harbour

Plans to give the Harbourfront Commission some real teeth in the form of executive powers are lumbering forward. The plan, which was discussed in this column a year ago, has not proceeded as fast as initially envisaged. Does it need these powers? Absolutely.

Anybody that tries to do anything in Hong Kong is immediately faced with a myriad of bureaucratic fiefdoms that conflict and overlap and ultimately delay. We have written before about the difficulties of monumental tasks like erecting signs in Central to the Maritime Museum, which takes months of consideration by numerous departments. Building a slipway from the new Sha Tin boathouse to the river, likewise, involved something like 11 government departments.

Trying to do anything around the harbour is far worse, which inevitably involves the marine, lands, civil engineering and development, and buildings departments, and so it goes on. Hong Kong government departments are well on their way to becoming mature bureaucracies that exist for the good of those who work there rather than serving the public.

The main criticism of the commission these days is that it is well-intentioned, but since it has no authority, it remains a talking shop. The harbourfront needs an overarching body with a vision and executive powers to override the horrendous bureaucratic quagmire that currently stultifies imaginative development. Developing the harbourfront requires a champion to exercise leadership and vision. There are people at the commission that can do this once they are given the authority.

Citi charity drive

Citi has come up with an interesting wheeze for raising money for charity. For every US$1 million traded on its foreign exchange trading platform, Velocity, it will donate US$1 to six charitable organisations. Citi is calling the three-month initiative, which started on October 1, e for Education, which, according to global head of G-10 FX Jeff Feig, "is the first and certainly the largest effort by a firm seeking to leverage its electronic [foreign exchange] trading activity into philanthropic dollars". The beneficiaries are Civic Builders, Empower, No Greater Sacrifice, Room to Read, Teach First and Uncommon Schools.

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