Email: email@example.com All parties have their latecomers, the sad cases who arrive once the beer has turned flat and most of the guests have left. Take a bow Cosco International, which turned up for the dotcom party only to find the door slammed in its face. The company's proposed acquisition of an Internet unit from its parent belonged so much to another era that the shareholders' circular should perhaps have been printed in sepia. That era was about six months ago, but then things move fast in the Internet world. Cosco International appears not to have noticed that conditions are not quite what they were in March. There has been the small matter of a tumble in the Nasdaq, which has fundamentally altered perceptions of dotcoms. Optimists may argue the Nasdaq has bounced, but the rebound has been largely driven by technology companies with real earnings. The newer and shakier dotcoms have continued to sink, a category to which 'e-logistics provider' Cosco Network surely belongs. Cosco International asked its shareholders to pay HK$886 million for Cosco Network, a business that was incorporated on March 30 and had an unaudited net asset value of HK$85.22 million as of July 31. The purchase would have been settled by issuing 973.63 million new shares to mainland parent China Ocean Shipping (Group), massively diluting minority holders. The new shares, equivalent to 70.45 per cent of Cosco International's existing issued share capital, would have reduced its net asset value from HK$1.20 per share to 74 HK cents. Independent shareholders duly rejected the acquisition at a special general meeting on Monday. The decision, correct though it was, was nonetheless surprising and intriguing. Cosco International executives were reluctant to discuss the aborted transaction. Managing director Gordon Kwong Che-keung declined to give the voting percentages, nor did he say whether the vote was taken on a poll (in which each share counts) or with a show of hands. Who scuppered the deal? The overturning of connected transactions is rare in Hong Kong, where independent shareholders face being voted down by management-friendly stock-holding employees unless they have the 10 per cent stake needed to call a poll. No minority investor holds more than 10 per cent of Cosco International, and analysts say the company is unlikely to have many institutional shareholders, the most likely opponents of such a deal. Unlikely as it may seem then, the case may be a genuine and long-overdue sign of Hong Kong shareholder activism at the retail level. There was plenty to dislike in the deal. Since the valuation of Cosco Network was based on the future worth of contracts with other Cosco group companies, the controlling shareholder was in effect helping itself to a chunk of the company's real assets in exchange for an IOU. These contracts would have enmeshed Cosco International in a web of ongoing connected transactions, in relation to which it had sought compliance waivers from the stock exchange. Valuation was another tendentious issue. Cosco International bought 0.91 per cent of Cosco Network for HK$7.77 million in April, implying a valuation of HK$854 million. In other words, shareholders were being asked to accept the valuation of this business had increased whileprices of other newly listed Internet start-ups had gone through the floor. Following Monday's reversal, Mr Kwong was quoted as saying the group still aimed to turn Cosco International into its technology flagship and would inject assets into the company in future. A better idea might be to consolidate all the group's assets into one listed company, eliminating thorny questions over intra-group transfer pricing, and leaving the interests of majority and minority shareholders aligned. The controlling shareholder could then concentrate on building the value of the business, to the benefit of all. But don't hold your breath.