Appeal puts PCCW buyout deal on hold
The Securities and Futures Commission yesterday appealed against the High Court's approval of the HK$15.9 billion PCCW buyout deal. The appeal is expected to lead to further delays to the privatisation.
The Court of Appeal accepted the SFC appeal at 7pm, just hours after the deal was sanctioned by a High Court judge, who said the regulator had not substantiated its accusation of vote-rigging at a shareholders' meeting that approved the deal.
Madam Justice Susan Kwan Shuk-hing ruled yesterday that there was no evidence to show that Francis Yuen Tin-fan, deputy chairman of PCCW's majority shareholder, Pacific Century Regional Developments, had tried to influence the privatisation deal, despite phone contact with an insurance company executive who later bought shares in the telecommunications company.
Shares in PCCW will resume trading this morning after being suspended since April 1, when they last traded at HK$3.98.
The SFC had alleged that Fortis Insurance Asia regional director Lam Hau-wah bought the PCCW shares after talking on the phone several times to Mr Yuen. The regulator says that the shares were split into small lots and distributed to agents who agreed to vote for the privatisation deal.
Madam Justice Kwan did not find that there had been any scheme by Mr Lam to help in PCCW's privatisation or that votes cast as a result of the share-splitting by Mr Lam should be disregarded.
She said the splitting of shares was not a prohibited activity in Hong Kong, and that under common law a shareholder was entitled to transfer some of his shares to nominees to increase his voting power.
Shareholder activist David Webb said her judgment would open the door to share-splitting. 'The upshot will be open season on vote-rigging in takeover deals,' he said. 'It makes Hong Kong look comical, as if people were engaging in the great paper race to register votes in favour before a deal.'
Alan Ewins, financial services partner at international law firm Allen & Overy, said the judge had kicked the ball firmly back into the SFC's court when it came to drawing up legislation on potential vote-rigging. 'The judge has signposted the court isn't there to make policy.'
The hearing of the SFC's appeal against the approval will be heard before Mrs Justice Doreen Le Pichon, Mr Justice Peter Cheung Chak-yau and Mr Justice Aarif Barma on April 16.
Mr Justice Anthony Rogers and Mrs Justice Le Pichon, who handled yesterday's urgent application by the SFC, also granted a stay for the implementation of the PCCW privatisation to April 16.
The company said the SFC's appeal to the Court of Appeal meant that several conditions of the deal would not be satisfied on or before the April 23 deadline.
The stay will further delay the PCCW privatisation procedure, in which the company had previously set April 14 as the date for the company's stock to be delisted.
Outside the court, a minority shareholder identifying himself only as Mr Wong said the judge had been unfair to minority shareholders. 'The judge seems afraid of those rich people. The government did not hear what the minority shareholders said about the money they had lost through investing in PCCW shares. We need to appeal.'
