PCCW chairman raises buyout offer for largest HK telecom firm

PCCW Ltd. chairman Richard Li and his co-bidder raised the buyout offer for Hong Kong's biggest phone company, minutes before minority shareholders were due to vote on a proposal proxy advisers had criticised as being too low.

Li, through a company he controls called Pacific Century Regional Developments, and PCCW's other major owner, China Network Communications Group, are trying to buy the 52.4 per cent of the company they don't already own.

The proposed price was increased to HK$4.50 a share from HK$4.20, PCCW director David Ford said. The latest offer is 30 per cent higher than the stock's last closing price and values PCCW at HK$30.5 billion ($3.9 billion).

The new bid amounts to about HK$16 billion ($2.05 billion) excluding options, and an estimated HK$17 billion ($2.2 billion) including options. The previous offer of HK$15.94 billion included options.

The improved offer may be insufficient to win support from minority shareholders, who have seen PCCW's stock price fall 97 per cent since Li bought the former Cable & Wireless HKT Ltd. in 2000. PCCW has been thwarted in efforts to expand overseas and was removed from the city's benchmark Hang Seng Index in June.

For many investors, the new improved offer still means taking a loss. That's true even of many short-term holders; PCCW shares traded above HK$4.50 consistently from March to September of this year. But it's a loss that has to be weighed against what shareholders could be left with if the deal fails. The stock was trading at HK$2.90 before the first bid was made in October, and the company's core business is slowly deteriorating.

Those who hold out for more - some say a price of closer to US$2.4 billion or HK$5 a share is more appropriate - risk watching Li walk away as he has before when he doesn't like the terms - most recently abandoning an effort to sell a stake in PCCW's telecoms, media and information technology business.

In October, PCCW failed to sell as much as a 45 per cent stake in its HKT Group Holdings Ltd. unit after getting bids that weren't ''sufficiently attractive.'' Offers of between $650 million and $765 million were received for the HKT Group stake, PCCW said this month. (See: Hong Kong's PCCW seeks to sell 45 per cent stake in HKT Group for $2.5 billion)

PCCW shares haven't traded higher than the original offer price since the buyout plan was announced last month, reflecting doubts that the proposal would succeed. The company adjourned a shareholder meeting today to let investors consider the revised offer.