Power As­sets share­hold­ers re­ject Li Ka-shing’s $12.4b of­fer

Che­ung Kong In­fra­struc­ture deal seen as un­der­valu­ing di­verse con­glom­er­ate

China Daily (Canada) - - BUSINESS - By BLOOMBERG

Bil­lion­aire Li Ka-shing’s Power As­sets Hold­ings Ltd and Che­ung Kong In­fra­struc­ture Hold­ings Ltd fell on Wed­nes­day in Hong Kong trad­ing af­ter share­hold­ers re­jected a $12.4 bil­lion deal from the city’s rich­est man.

On Tues­day, mi­nor­ity share­hold­ers blocked a pro­posal for CKI to buy out Power As­sets, deal­ing a rare set­back for a ty­coon who is so revered in Hong Kong for his busi­ness acu­men that he is known as “Su­per­man”. The pro­posal’s col­lapse prompted an­a­lysts at Daiwa Se­cu­ri­ties Group Inc andUBSGroupAGto cut their in­vest­ment rat­ings on Power As­sets.

Ear­lier this month, in­flu­en­tial proxy ad­vis­ers In­sti­tu­tional Share­holder Ser­vices Inc and Glass Lewis & Co rec­om­mended in­vestors voted against Li’s pro­posal, say­ing the of­fer was too low. The 87-year-old ty­coon, who merged his two flag­ship units ear­lier this year, is seek­ing to consolidate his busi­ness em­pire be­fore hand­ing over con­trol of his em­pire to his el­der son Vic­tor.

“Peo­ple had val­u­a­tion con­cerns and they were not happy with the pro­posal,” said Ron­aldWan, chief ex­ec­u­tive at Part­ners Cap­i­tal In­ter­na­tional in Hong Kong. “It’s a short­term set­back to Li’s plan to stream­line his busi­nesses. But they will still pursue it again, even though it’s not likely in the short term.”

Li failed to get enough Power As­sets mi­nor­ity share­hold­ers vot­ing at a meet­ing on Tues­day to ap­prove the deal, ac­cord­ing toas­tate­mentto the HongKong ex­change. In­order to go through, the pro­posal needed at least 75 per­cent of votes cast by mi­nor­ity share­hold­ers to ap­prove the trans­ac­tion. Only 50.8 per­cent did.

Be­cause of the vote re­sults, CKI will not be able to make an­other at­tempt to buy Power As­sets for an­other year. Both com­pa­nies said in sep­a­rate state­ments they were dis­ap­pointed with the out­come.

An­a­lysts at Daiwa, which says it was the first bro­ker to make the case for a CKI-Power As­sets merger, was also dis­ap­pointed. It pro­jected the stock could see 13 per­cent of “value de­struc­tion”.

CKI had of­fered 1.066 of its shares for ev­ery one of af­fil­i­ate Power As­sets, a trans­ac­tion val­ued at $12.4 bil­lion based on their stock prices be­fore Wed­nes­day. It had also pro­posed a spe­cial div­i­dend of HK$7.50 per share payable to the com­bined com­pany’s share­hold­ers af­ter the deal.

In ad­di­tion to fail­ing to get enough votes, about 26 per­cent of Power As­set’s mi­nor­ity in­vestors re­jected the deal. To go through, no more than 10 per­cent of those share­hold­ers could turn down the pro­posal.

At Tues­day’s vote, jour­nal­ists were not al­lowed into the meet­ing venue and ex­ec­u­tives dodged re­porters’ ques­tions as they made their way out from the hours-long ses­sion. Some in­vestors voiced frus­tra­tion with the of­fer.

“No one from man­age­ment could per­suade some of us to vote in fa­vor of the of­fer be­cause it isn’t jus­ti­fi­able,” said Hui Ming-tak, who has held 4,000 shares of Power As­sets for more than 10 years. “The deal is more tilted in fa­vor of CKI than Power As­sets.”

The pro­posed merger, first an­nounced on Sept 8, would have given CKI full con­trol of Power As­sets’ more than $8.7 bil­lion in cash and equiv­a­lents, which could have been used to fund fu­ture ac­qui­si­tions. Af­ter the deal, the Li fam­ily’s CK Hutchi­son Hold­ings Ltd would have con­trolled the com­bined com­pany with a 49 per­cent stake.

In the past two years, CKI and Power As­sets have bought as­sets in­clud­ing an Aus­tralian gas dis­trib­u­tor, a Dutch waste pro­ces­sor and an air­port park­ing busi­ness in Canada. The com­bined com­pany would have owned and op­er­ated util­i­ties, waste man­age­ment and trans­porta­tion in the Chi­nese main­land, Europe and Aus­tralia.

Peo­ple had val­u­a­tion con­cerns and they were not happy with the pro­posal.”


Bil­lion­aire Li Ka-shing

at a press con­fer­ence in Hong Kong ear­lier this year.

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