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Peggy Sito

Lai Sun Hotels International (LSHI) has gained shareholder approval for the HK$1.9 billion purchase of part of a proposed redevelopment of the Furama Hotel from its parent Lai Sun Development (LSD), thanks in part to a favourable vote from Cosco (HK).

 The controversial deal - which includes the purchase of 50,666 square feet of planned retail space and 198 hotel rooms - is seen by analysts as a move to further help reduce its parent's debts.

 LSD is expected to use the proceeds to lower its gearing to less than below 50 per cent.

 LSHI director Victor Yang Hung-ping said 87.5 per cent of shareholders voted in favour of the plan at yesterday's special general meeting, which includes Cosco and its 20 per cent stake.

 LSD - which owns 52.17 per cent of LSHI - and Lai Sun group's ultimate shareholder, the Lim Por-yen family, were not allowed to vote yesterday.

 However, the purchase drew strong criticism from some minority shareholders.

 Simon Walker, a lawyer voting for US-based investor Wings Worldwide, said: 'My client can't understand how the company could pay a billion dollars now for a development where it won't get its interest until 2004.'  Under the proposal, LSHI will pay an immediate HK$964.92 million to LSD with the balance on completion, expected to be 2004.

 Wings owns 2 per cent of LSHI and voted against the purchase at the meeting.

 Mr Walker said his client bought LSHI shares when those assets were mainly outside Asia.

 Wings was disappointed the hotel concern poured its cash into its parent and a large development in Hong Kong, adding shareholders deserved a share of the profit LSHI earned from the sale of its stake in New York's Four Seasons Hotel for US$137.5 million.

 The Furama Hotel purchase was announced last month, shortly after the company concluded the Four Seasons Hotel sale.

 Mr Yang yesterday rejected the allegation, saying the deal would enhance the value of the redevelopment as well as the adjacent Ritz-Carlton, in which LSHI has a 65 per cent stake.

 He expected to see an annual return of 10 per cent from the investment.

 The retail and hotel portion is part of a proposed mixed-use complex comprising about 446,210 sq ft on the site occupied by the Furama Hotel.

 The project also includes 223,245 sq ft of space which will remain as an asset of LSD.

 Mr Yang said at the moment no special dividend payout was under consideration.

 He said it was indeed 'a rare opportunity' for the company to invest in the project.

 He said the move indicated the company's confidence in the hotel industry.

 The proposal was also approved by shareholders of LSD and Lai Sun Garment (International) at their special general meetings held yesterday.

  This is not the first time LSHI has been used to alleviate LSD's debt problem.

 Last June, LSHI bought a HK$105 million stake in a resort in Vietnam from LSD.



Lai Sun voters clear partial Furama buy