Since Richard Li Tzar-kai, the younger son of Li Ka-shing, became involved in the Hong Kong stock market 10 years ago, he has hardly been out of the spotlight, capturing the imagination and indignation of investors as well as the attention of the regulators.
He has figured in some of Hong Kong’s most high-profile deals over the past decade - deals that have brought out some of the best and the worst in the local financial market.
It all began on May 4, 1999, when Richard Li and his Singapore-listed Pacific Century Regional Developments announced it was taking a 70 per cent stake in Hong Kong-listed Tricom Holdings for HK$2.46 billion.
The company changed its name to Pacific Century CyberWorks (and later to PCCW) and became Mr. Li’s flagship for property developments, including the controversial Cyberport project of the Hong Kong government.
The previous year, Mr. Li had secured an exclusive agreement to develop the high-technology multimedia hub in Pok Fu Lam at an initial cost of HK$13 billion.
While the government would provide the land and infrastructure worth HK$7 billion, Mr. Li’s company would be responsible for the development and tenant business of the project. The government and PCCW would share profits from the sale of any residential development.
Thus, with the government’s blessing, PCCW and Mr. Li became the vanguard of information technology development in Hong Kong. PCCW shares skyrocketed 1,300 per cent to HK$1.84 on May 5, 1999, from 13.6 HK cents at the previous close.
Mr. Li then caused a stir by investing in several local and overseas information technology firms that instantly became icons as the internet bubble grew bigger and bigger.
Investors flocked to PCCW even though the company still lacked a concrete business model and, by the end of 1999, the company’s shares had climbed to almost HK$60.
Come the new millennium, and Mr. Li was presented with a golden opportunity to turn his virtual business model into the real thing in the shape of Cable and Wireless, the British telephone company that owned the city’s biggest fixed-line network, Cable and Wireless HKT, which came to the market.
Cable and Wireless had reached a tentative agreement with Singapore Telecommunications, but Mr. Li surprised the market by entering into a bidding war for control of HKT. It was a war he eventually won in a record-breaking HK$300 billion deal, thanks to support from state-owned Bank of China, which provided a bridging loan.
PCCW’s shares hit a record high of HK$28.50 before consolidation in February 2000.
“Mr. Li was clever, as he captured the opportunity to turn a virtual internet concept into reality,” a veteran banker remembered. “At the time, he did really think HKT could converge with PCCW’s internet business to create a trend in the telecommunications industry.”
The deal turned PCCW into the fourth-biggest company in Hong Kong by market capitalisation. However, when the celebrations had died down, Mr. Li was left dealing with the city’s largest but sluggishly performing telecommunications firm and a mountain of debt.
With the merger completed, Mr. Li set about restructuring the HKT business in August 2000 to cut costs and pay back the loan. In the eyes of the public, he became a dealmaker, gradually selling valuable HKT assets such as the global submarine cable business and mobile operation to Australia’s Telstra Corp.
But by then, the internet bubble had burst, the company’s huge gearing was hampering any development and the core fixed-line business was facing fierce competition from mobile-telephone operators.
By the time Mr. Li had completely sold the mobile arm to Telstra in 2002, PCCW’s fixed-line business was losing 30,000 customers a month. Shares tumbled to below HK$1 each for the first time in October 2002, and the company announced a five-to-one consolidation plan in January 2003 to shore up the share price.
Investors blamed Mr. Li for the 90 per cent collapse in the share price. Older shareholders, who offloaded their HKT shares for PCCW shares in the merger, received no post-deal dividend payment until 2004.
Small shareholders publicly questioned Mr. Li’s ability to lead the company.
Mr. Li, who had held the posts of chairman and chief executive since the merger, resigned as chief executive in June 2003 and appointed former MTR Corp chairman Jack So Chak-kwong as managing director.
The appointment proved a good move, as Mr. So looked after the day-to-day operations and oversaw new services such as Now TV. He also successfully stabilised the core fixed-line business by maintaining its market share at about 70 per cent with more than 2.6 million lines. It was in the wake of this that the company resumed paying dividends in 2004.
Meanwhile, Mr. Li was busy unlocking the value of PCCW’s assets by injecting the property business worth US$1 billion into the newly acquired Dongfang Gas Holdings, which became Pacific Century Premium Developments in March 2004.
In the second half of the year, Mr. Li started to approach mainland fixed-line company China Netcom Group Corp about taking a stake in PCCW. In January 2005, Netcom bought 20 per cent of the company at HK$5.90 a share.
With Netcom as a strategic shareholder, PCCW then acquired Hong Kong’s smallest mobile operator, Sunday Communications, to become a full-service provider. With the return to the mobile-telephone market and high growth in the Now TV business, things were looking up as PCCW entered 2006.
However, by June, Mr. Li’s attempts to exit PCCW surfaced as the company received proposals from foreign private equity firms to acquire the core telecommunications and media assets for between HK$50 billion and HK$60 billion.
PCCW said that after the sale it would distribute a special dividend to shareholders and then take the company private.
However, the deal faced strong criticism from Netcom and the central government, and a month later a consortium led by Francis Leung Pak-to offered to acquire Mr. Li’s PCRD stake in PCCW for HK$6 a share, leaving Mr. Li to pay a special dividend to other shareholders.
The deal lapsed after Mr. Li discovered that Mr. Leung’s proposal was supported by his father, Li Ka-shing.
“The 2006 deal at a price of HK$6 per share was the best deal for Mr. [Richard] Li, as he could cash out HK$9 billion from the sell-off,” a market watcher said.
“However, personal reasons [Richard Li did not want his father to intervene in his business] also hurt other shareholders’ interests, and the share price fell further.”
The latest bid to privatise the firm came after a failed attempt to sell a 45 per cent stake in a new unit, HKT Holdings, which holds the core telecommunications assets of PCCW.
In October last year, with PCCW’s share price below HK$3, the company announced a HK$15.93 billion buyout deal by PCRD and China Unicom Group at HK$4.50 per share. (Unicom had merged with Netcom then.)
The deal finally collapsed when it was blocked by the Court of Appeal, which was concerned about allegations of vote-rigging at the shareholders’ meeting that was held to approve the privatisation.
“Mr. Li’s every move has caused discontent among shareholders,” a telecommunications analyst said.
“It would be better if Mr. Li stepped back and sold his PCCW stake to a third party, who could then take the company private, rather than do it by himself, as investors are emotional.”
1 comment:
A corporate career cast in controversy
PCCW chief Richard Li rarely out of spotlight
Frederick Yeung
12 May 2009
Since Richard Li Tzar-kai, the younger son of Li Ka-shing, became involved in the Hong Kong stock market 10 years ago, he has hardly been out of the spotlight, capturing the imagination and indignation of investors as well as the attention of the regulators.
He has figured in some of Hong Kong’s most high-profile deals over the past decade - deals that have brought out some of the best and the worst in the local financial market.
It all began on May 4, 1999, when Richard Li and his Singapore-listed Pacific Century Regional Developments announced it was taking a 70 per cent stake in Hong Kong-listed Tricom Holdings for HK$2.46 billion.
The company changed its name to Pacific Century CyberWorks (and later to PCCW) and became Mr. Li’s flagship for property developments, including the controversial Cyberport project of the Hong Kong government.
The previous year, Mr. Li had secured an exclusive agreement to develop the high-technology multimedia hub in Pok Fu Lam at an initial cost of HK$13 billion.
While the government would provide the land and infrastructure worth HK$7 billion, Mr. Li’s company would be responsible for the development and tenant business of the project. The government and PCCW would share profits from the sale of any residential development.
Thus, with the government’s blessing, PCCW and Mr. Li became the vanguard of information technology development in Hong Kong. PCCW shares skyrocketed 1,300 per cent to HK$1.84 on May 5, 1999, from 13.6 HK cents at the previous close.
Mr. Li then caused a stir by investing in several local and overseas information technology firms that instantly became icons as the internet bubble grew bigger and bigger.
Investors flocked to PCCW even though the company still lacked a concrete business model and, by the end of 1999, the company’s shares had climbed to almost HK$60.
Come the new millennium, and Mr. Li was presented with a golden opportunity to turn his virtual business model into the real thing in the shape of Cable and Wireless, the British telephone company that owned the city’s biggest fixed-line network, Cable and Wireless HKT, which came to the market.
Cable and Wireless had reached a tentative agreement with Singapore Telecommunications, but Mr. Li surprised the market by entering into a bidding war for control of HKT. It was a war he eventually won in a record-breaking HK$300 billion deal, thanks to support from state-owned Bank of China, which provided a bridging loan.
PCCW’s shares hit a record high of HK$28.50 before consolidation in February 2000.
“Mr. Li was clever, as he captured the opportunity to turn a virtual internet concept into reality,” a veteran banker remembered. “At the time, he did really think HKT could converge with PCCW’s internet business to create a trend in the telecommunications industry.”
The deal turned PCCW into the fourth-biggest company in Hong Kong by market capitalisation. However, when the celebrations had died down, Mr. Li was left dealing with the city’s largest but sluggishly performing telecommunications firm and a mountain of debt.
With the merger completed, Mr. Li set about restructuring the HKT business in August 2000 to cut costs and pay back the loan. In the eyes of the public, he became a dealmaker, gradually selling valuable HKT assets such as the global submarine cable business and mobile operation to Australia’s Telstra Corp.
But by then, the internet bubble had burst, the company’s huge gearing was hampering any development and the core fixed-line business was facing fierce competition from mobile-telephone operators.
By the time Mr. Li had completely sold the mobile arm to Telstra in 2002, PCCW’s fixed-line business was losing 30,000 customers a month. Shares tumbled to below HK$1 each for the first time in October 2002, and the company announced a five-to-one consolidation plan in January 2003 to shore up the share price.
Investors blamed Mr. Li for the 90 per cent collapse in the share price. Older shareholders, who offloaded their HKT shares for PCCW shares in the merger, received no post-deal dividend payment until 2004.
Small shareholders publicly questioned Mr. Li’s ability to lead the company.
Mr. Li, who had held the posts of chairman and chief executive since the merger, resigned as chief executive in June 2003 and appointed former MTR Corp chairman Jack So Chak-kwong as managing director.
The appointment proved a good move, as Mr. So looked after the day-to-day operations and oversaw new services such as Now TV. He also successfully stabilised the core fixed-line business by maintaining its market share at about 70 per cent with more than 2.6 million lines. It was in the wake of this that the company resumed paying dividends in 2004.
Meanwhile, Mr. Li was busy unlocking the value of PCCW’s assets by injecting the property business worth US$1 billion into the newly acquired Dongfang Gas Holdings, which became Pacific Century Premium Developments in March 2004.
In the second half of the year, Mr. Li started to approach mainland fixed-line company China Netcom Group Corp about taking a stake in PCCW. In January 2005, Netcom bought 20 per cent of the company at HK$5.90 a share.
With Netcom as a strategic shareholder, PCCW then acquired Hong Kong’s smallest mobile operator, Sunday Communications, to become a full-service provider. With the return to the mobile-telephone market and high growth in the Now TV business, things were looking up as PCCW entered 2006.
However, by June, Mr. Li’s attempts to exit PCCW surfaced as the company received proposals from foreign private equity firms to acquire the core telecommunications and media assets for between HK$50 billion and HK$60 billion.
PCCW said that after the sale it would distribute a special dividend to shareholders and then take the company private.
However, the deal faced strong criticism from Netcom and the central government, and a month later a consortium led by Francis Leung Pak-to offered to acquire Mr. Li’s PCRD stake in PCCW for HK$6 a share, leaving Mr. Li to pay a special dividend to other shareholders.
The deal lapsed after Mr. Li discovered that Mr. Leung’s proposal was supported by his father, Li Ka-shing.
“The 2006 deal at a price of HK$6 per share was the best deal for Mr. [Richard] Li, as he could cash out HK$9 billion from the sell-off,” a market watcher said.
“However, personal reasons [Richard Li did not want his father to intervene in his business] also hurt other shareholders’ interests, and the share price fell further.”
The latest bid to privatise the firm came after a failed attempt to sell a 45 per cent stake in a new unit, HKT Holdings, which holds the core telecommunications assets of PCCW.
In October last year, with PCCW’s share price below HK$3, the company announced a HK$15.93 billion buyout deal by PCRD and China Unicom Group at HK$4.50 per share. (Unicom had merged with Netcom then.)
The deal finally collapsed when it was blocked by the Court of Appeal, which was concerned about allegations of vote-rigging at the shareholders’ meeting that was held to approve the privatisation.
“Mr. Li’s every move has caused discontent among shareholders,” a telecommunications analyst said.
“It would be better if Mr. Li stepped back and sold his PCCW stake to a third party, who could then take the company private, rather than do it by himself, as investors are emotional.”
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