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Boto International Holdings has extended the deadline for the proposed HK$1 billion sale of its core business by three months.

The move indicates the management's determination to proceed with the controversial transaction despite mounting opposition from minority shareholders.

In an announcement yesterday, the artificial Christmas tree-maker said the parties to the sale had agreed to extend the deadline for the deal to August 31 from today.

The extension was needed because under the previous agreement, the deal would have lapsed automatically today.

'It would be wiser to allow the deal to lapse . . . because it is obvious there will be no public support for it,' said David Webb, editor of Webb-site, who is campaigning against the deal.

The delay arises from the company's appeal against a Hong Kong Exchanges and Clearing ruling that all existing and proposed executive directors and certain shareholders be barred from voting on the deal.

Boto is proposing to sell its profit-making core business to a firm connected to its chairman, Michael Kao Cheung-chong, at a seven-times historic price-to-earnings ratio, which is considered by many a cheap price.

As a connected transaction, the deal requires the approval of independent shareholders at a special general meeting, at which Mr Kao and his family, who control about 57 per cent of Boto shares, will presumably be forbidden to vote.

With opposition from minority shareholders building, the HKEx's ruling was considered unfavourable to the management's bid to proceed with the deal because it would bar Mr Kao's board colleagues from voting their shares.

The executive directors other than Mr Kao and his family are estimated to hold a combined 9 per cent of Boto's shares.

Opposition minority shareholders such as Mr Webb and Templeton Emerging Markets Fund, who have indicated they will vote against the deal, hold about 12 per cent.

HKEx's listing review committee met to consider the company's appeal on May 23 but the result has yet to be announced.

'The exchange usually sustains its ruling, unless sufficient supplementary information is given to support the appeal,' a listing rule expert said.

The deal has become increasingly controversial since it was announced in early April. Many experts regard it as a test for the standard of corporate governance in Hong Kong.

Boto has said that after the deal, it would refocus on its fledgling computer animation business, which has yet to record revenue, effectively turning a HK$100 million-plus profit-maker into a zero-income start-up.

The company recorded a net profit of HK$156.37 million last year.

This year, a Kim Eng Securities report estimated net profit would grow 14.83 per cent to nearly HK$180 million.

Based on this forecast, the deal's HK$994 million cash consideration represents a prospective PE ratio of only about 5.8 times.



Boto pushes on with controversial sale