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China Netcom welcomes PCCW deal
By Jonathan Yeung (China Daily)
Updated: 2006-07-12 08:41
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China Netcom welcomed the PCCW deal yesterday, saying it would further co-operate with Hong Kong's largest phone operator.
But local minority shareholders disagreed and began selling PCCW shares, causing a drop in share prices.
"China Netcom Group welcomes Mr (Francis) Leung's participation and believes he will contribute to the continued and healthy development of PCCW," Netcom said in a statement early yesterday.
The company stressed it would "maintain and strengthen its strategic partnership."
Last year China Netcom paid US$1 billion, or HK$5.9 (76 US cents) per share, for a 20 per cent stake in PCCW. It is now the second largest shareholder in PCCW.
But shares in Netcom's listed unit in Hong Kong, China Netcom (Hong Kong), fell by 5.15 per cent to HK$13.8 (US$1.77) yesterday.
On Monday, PCCW's controlling shareholder Richard Li agreed to sell a 22.66 per cent stake to local banker Leung, who is believed to have good relations with Netcom and many big mainland companies, for HK$9.16 billion (US$1.17 billion).
The deal, however, caused a drop in PCCW's share price yesterday, despite Li personally earmarking HK$1.38 billion (US$177 million) for minority shareholders as a special dividend. His offer will translate into as much as HK$0.38 (4.9 US cents) per share.
PCCW shares declined by as much as 9.9 per cent, hitting a low of HK$5 (64 US cents) before regaining a bit to end the day at HK$5.1 (65 US cents). That compares to a previous closing price of HK$5.55 (71 US cents).
"I think local investors were a bit disappointed because the deal was not as they previously expected," said an analyst. "They had thought it would be selling PCCW's core business, but not selling Li's holding to Leung."
Some analysts said two other bidders Macquarie Bank and US buyout firm Texas Pacific Group's Asian arm TPG-Newbridge might still have the chance to access PCCW's assets.
PCCW said yesterday that it would continue discussions with them.