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PCCW's Richard Li wins but approval overturned

A controversial US$2-billion effort by a powerful Hong Kong businessman to buy out a leading telecommunications company won court approval yesterday, overcoming a challenge from regulators who asserted the deal was marred by vote-rigging.

But the Hong Kong court's decision approving the deal for fixed-line phone company PCCW Ltd was suspended just hours later by an appeals court at the request of regulators.

The topsy-turvy day of legal maneuvering marked what could be the finale of Chairman Richard Li's latest effort to take private a telecom firm that never lived up to its aspiration as a regional high-tech powerhouse.

Li, the scion of one of Hong Kong's most influential families, is nicknamed "Little Superman" after his billionaire father Li Ka-shing, himself dubbed "Superman" for his business acumen.

The deal has dominated headlines in this Asian financial capital in recent weeks amid fierce criticism that Li was dramatically undervaluing the territory's major landline operator and claims the vote was rigged to garner shareholder support.

Hong Kong's securities watchdog, the Securities and Futures Commission, opened an investigation and sought to block the deal in a rare case of court intervention by the territory's regulators.

The commission lawyers maintained February's shareholder vote was unfairly manipulated after about half a million PCCW shares were doled out to employees of Fortis Insurance Company (Asia) Ltd in an effort to sway votes in favor of the deal. An executive who distributed the shares has ties to Li's associates.

But Hong Kong Judge Susan Kwan ruled yesterday that she was not convinced and sanctioned the buyout, saying there was a lack of evidence to back the regulator's case. The deal was one an "intelligent and honest man" might "reasonably approve," Kwan wrote.

With Li and his partners aiming to delist the firm in the coming weeks, regulators quickly launched an appeal.

Last night, a two-judge appeals panel granted the regulator's request to put the lower court's approval on hold until April 16 - calling the legal issues "sufficiently serious."

The commission, while not opposed to the deal itself, is challenging the judge's decision to back a practice known as vote-splitting that can swing shareholder polls, regulators said.

PCCW and its partners have denied any efforts to illegally influence the vote, with its attorney calling the shares "a gift given with no strings attached" and criticizing the regulator's probe as "biased, improper and incomplete."

The deal, worth HK$15.9 billion (US$2.04 billion), would pay stockholders HK$4.50 for each share, giving Li and his buyout partners majority ownership.



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