PCCW deal 'dishonest', rules HK appeals court

11 May 2009

Hong Kong's court of appeal today condemned as "nothing less than dishonesty" the voting on a scuttled $2.1-billion deal to privatise the city's biggest telecom operator, PCCW.

In a note explaining the reasons for its judgment turning down PCCW's majority shareholders Richard Li and China Unicom, who wanted to take the company private, the court said the bid was clearly manipulated and may not reflect the interest of minority shareholders.

''There was a clear manipulation of the vote,'' Judge Anthony Rogers said in the 74-page ruling, the court of appeal's first explanation of why it blocked the HK$15.93 billion ($2.1 billion) deal on 22 April.

''Vote manipulation is nothing less than a form of dishonesty. The court cannot sanction dishonesty. It is also a form of coercion where the wishes of the minority in number of shares are overridden by those who hold the majority of the shares," Justice Anthony Rogers wrote.

The three-judge court ruled that the splitting of stock holdings ahead of shareholder votes, while legal, can undermine the spirit of the law and amount to manipulation. The Securities and Futures Commission had argued that some PCCW investors were improperly offered stock to boost support for the bid.

The judge said it could not sanction the deal because "there was a clear manipulation of the vote and because of the extent to which that happened the court cannot be sure that the vote was fair."