Lai See | Francis Leung annoys investors with sale of Imagi's main asset
We understand there is some disquiet on the part of some shareholders in Hong Kong-listed Imagi International, which is chaired by the "father of the red chips" of years gone by, Francis Leung Pak-to.
Leung, it will be recalled, worked with Philip Tose at Peregrine Investments, which soared in the early 1990s before crashing and burning in 1998. In 2010, he bought into Imagi, which designs, develops, produces, distributes and licenses original animated products. In early 2011, he announced an HK$814 million deal to buy mainland brand manager Toon Express, which owns the character copyrights of , which is a successful animation series. In September this year, Imagi said it was to sell its main asset, Infoport Management, which includes Toon Express, for HK$634.2 million.
Fund manager Fidelity, which owns about 8 per cent of Imagi, is, we are reliably told, unhappy that Toon Express was sold only two years after the purchase since it believed the company had considerable potential. It is also being sold for about 22 per cent less than its purchase price.
The other reason Fidelity is unhappy is that since Imagi will end up a cash shell after the transaction, there is a good chance it will be delisted, under stock exchange rules, unless it rapidly finds something else to invest its cash in.
The final source of the unhappiness is that rather than use an independent financial adviser to prepare a report on the best course of action for shareholders, the board in its wisdom opted to use a company called Luminary Capital, which is being paid HK$5 million and is 100 per cent owned by Leung. Not for nothing is this called a connected transaction. Shareholders feel that an independent firm would advise against the deal. In another sour note to the proceedings, the special general meeting to vote on the deal has been arranged at the unusually early time of 8.45am on October 21. Shareholders and observers are curious as to the urgency for the deal.
