Even Hong Kong’s richest man, Li Ka-shing, has to bow to activist shareholders
Failure to merge Power Assets with Cheung Kong Infrastructure shows minority shareholders are starting to gain greater clout
Li Ka-shing may be Hong Kong’s Superman, but he is not invincible. In his year-long restructuring of his business empire, the latest and last major reshuffle has hit a snag. Minority shareholders of Power Assets this week rejected a proposed merger between the power supply giant and its parent company, Cheung Kong Infrastructure (CKI).
The shareholder revolt is the latest indication that minority investors in Hong Kong, for a long time a passive lot, are learning to exercise their rights to gain better deals from dominant players. As such, it should be seen as a welcome development.
Li initially offered 1.04 CKI shares for each Power Assets share. After shareholders expressed displeasure at the low price swap, he sweetened it by offering to swap each Power Assets share for 1.066 CKI shares.
He also increased a special dividend by 50 per cent for CKI and Power Assets shareholders once the merger was completed.
But the total US$3.77 billion payout would eventually come from the US$7.5 billion net cash to which Power Assets investors had a claim anyway.
As one commentator wrote, that was like wooing children with their own candies. Both ISS and Glass Lewis, which advise fund managers, urged Power Assets shareholders to vote against the merger.