Li offers to buy warrants
THE chairman of Cheung Kong (Holdings) and Hutchison Whampoa, Mr Li Ka-shing, is today taking the unprecedented step of offering $495 million to buy all the remaining covered warrants in both companies after off-the-cuff remarks he made last Thursday depressed their share prices.
Peregrine Capital, on Mr Li's behalf, would be in the stock market today to undertake the transaction, Mr Philip Tose, Peregrine chairman told an impromptu press conference held yesterday afternoon.
Comments made by Mr Li on Thursday evening relating to the potential for a cash call at Hutchison depressed the Li company shares on Friday.
The last day of trading for Cheung Kong's warrants is tomorrow, while that for Hutchison's warrants is Friday.
Peregrine is stepping in to buy the outstanding covered warrants in Hutchison and Cheung Kong at pre-depressed prices - Thursday's closing quotes.
''This action is being taken to avoid any criticism being levelled at Mr Li suggesting he might be taking advantage of the situation,'' said Mr Tose.
On Friday, the stock market fell 0.5 per cent, but Cheung Kong lost 60 cents, 2.5 per cent, to $22.90 and Hutchison shed 40 cents, 2.25 per cent, to $17.60.
''The warrants fell by a lot more, in the region of some 20 per cent.
''In trading in London, the shares of the group continued to fall, with Cheung Kong standing at $22.45-$22.75 and Hutchison fell to $17.20-17.50,'' said Mr Tose.
Peregrine is offering to buy the Cheung Kong covered warrants - Sponikle - at Thursday's closing price of $3.60 each.
On Friday, Sponikle 1993 closed down 19.4 per cent or 70 cents to $2.90. Mr Tose said it was estimated that there were 91 million Sponikle warrants outstanding.
The brokerage is also offering to buy all the remaining Hutchison covered warrants - Polycourt May 1993 - at $2.175.
On Friday, they closed at $1.68, down 22.7 per cent or 49.5 cents. Mr Tose estimated there were 77 million Polycourt warrants remaining outstanding.
The average price of Sponikle in the 12 months to Thursday is $4.824 and the average price of Polycourt over the same period is $2.638, according to Bloomberg.
Peregrine said in a statement yesterday: ''Peregrine Brokerage has been informed that Mr Li and Cheung Kong have not dealt in any of the Sponikle warrants, Polycourt warrants, shares of Cheung Kong or shares of Hutchison during the period April 1 to April 18 and that neither Mr Li nor Cheung Kong is aware of any price-sensitive information requiring disclosure.'' On Friday, Cheung Kong issued, at the request of the stock exchange, a statement of clarification following Mr Li's comments about a cash call at Hutchison being reported.
Mr Tose said he had contacted Mr Li the next morning to discuss worries about the depressed share prices of Li group companies.
This prompted some 12 hours of negotiations, which were temporarily suspended at 1.30 am yesterday before resuming later.
Mr Tose said Securities and Futures Commission executive director Ermanno Pascutto and stock exchange head of listing Herbert Hui Ho-ming had been contacted and had approved the action by Peregrine.
''Mr Li is very happy to undertake this offer to warrant-holders to ensure that they do not feel Mr Li is taking advantage of the situation,'' said Mr Tose.
Sponikle warrants were issued in two tranches of 110 million each at $5 and $5.30 a warrant. The first issue was on April 3 and the second was on May 3, both in 1991.
Polycourt warrants were issued in March and May of the same year. There were 120 million warrants at $2.50 each in the first issue and 153 million warrants at $3.80 each in the second.