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PCCW to proceed with vote on buyout

PCCW Ltd, Hong Kong's biggest phone company, will proceed with a vote on a buyout led by Chairman Richard Li after allegations insurance agents were offered stock in return for their support. The shares rose.

The company has "no knowledge of any improper share transfers," PCCW said in a Hong Kong stock exchange statement yesterday. The phone carrier will start reviewing its register of stockholders and cooperate on any possible action to be taken by the Securities and Futures Commission on the matter, it said.

The firm's shares climbed 8.3 percent as the statement dispelled concern that the allegations by investor activist David Webb might obstruct the HK$15.93 billion (US$2.05 billion) buyout plan. Webb said hundreds of insurance agents were offered shares in the company to support the bid and called on regulators to investigate, Bloomberg News reported.

''It's more probable than not" that PCCW shareholders will approve the takeover proposal at today's meeting, said Timothy Chan, who rates PCCW shares "sell" at CLSA Ltd in Hong Kong. Recent declines in local stock market have increased the bid's probability of success, he said.

PCCW closed at HK$4.19 in Hong Kong, the biggest gain since November 5, 2008. The stock is trading at a 6.9-percent discount to the offer price of HK$4.50. The shares resumed trading at 2:30pm after being suspended since Monday because of what the company said were "price sensitive" media reports.

The allegations won't prompt Glass, Lewis & Co, a San Francisco-based proxy advisory firm, to review its recommendation that shareholders accept the buyout offer, Managing Director Warren Chen said in an e-mail yesterday. The company last month advised PCCW investors to vote in favor of a second, higher bid by Li and China United Network Communications Group Co.

"The vote will probably be passed tomorrow (Wednesday) as the market's outlook is uncertain" and the chance of PCCW raising the offer is "quite slim," said Liu Yang, who oversees about US$2 billion in China assets at Atlantis Investment Management Ltd in Hong Kong. "In current market conditions, investors don't have much bargaining power in a privatization bid."

Li, the 42-year-old son of Hong Kong's richest man Li Ka-shing, and China United on December 30 raised their joint offer for PCCW by 7.1 percent per share.

The names of some newly registered PCCW investors with holdings of 1,000 shares each match those of agents from Fortis Insurance Co (Asia) Ltd, Webb said on Sunday. It's "likely" someone was dividing up their PCCW holdings into smaller chunks to make more people eligible to vote in the meeting.



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