C&W Raising Up to HK$10.4 Bln in CyberWorks Sale (Update7)
By Kate Linebaugh and Aaron Sheldrick
Hong Kong, Sept. 20 (Bloomberg) -- Cable & Wireless Plc, the U.K.'s No. 2 phone company, is selling a 4.9 percent stake in Pacific Century CyberWorks Ltd. for as much as HK$10.4 billion ($1.3 billion), or at least 37 percent less than what it would have received a month ago.
C&W received cash and about a fifth of CyberWorks on Aug. 17 in return for holdings in Hong Kong's No. 1 phone company, Cable & Wireless HKT Ltd. It is now selling about 1.04 billion shares to institutional investors for HK$9.68 to HK$9.98 each, according to Merrill Lynch & Co., which is handling the sale. The shares were trading at HK$15.80 when C&W acquired them.
The sale, which will leave C&W with 14.2 percent of CyberWorks, comes as investors worldwide question the value placed on Internet business pioneers. C&W sold control of HKT to CyberWorks, Asia's No. 2 Internet investment company, after holding talks with Singapore Telecommunications Ltd., Singapore's biggest telephone company.
``Investors may question the wisdom of their decision,'' said Peter Milliken, an analyst at Lehman Brothers Asia Ltd. in Hong Kong. ``They could have tied up with SingTel and got a higher price'' for the HKT stake, he said.
Founded by Richard Li, the son of billionaire Li Ka-Shing, CyberWorks fell 62 percent from a peak of HK$28.50 seven months ago. The stock was suspended today at HK$10.75.
Merrill Lynch of the U.S. is handling the sale along with ABN Amro Holding NV, HSBC Holdings Plc and BNP Paribas SA.
Further Declines
CyberWorks shares could fall as low as HK$7, said Eric Tomter, an analyst at Dresdner Kleinwort Benson, who recommends his clients sell the stock. Beyond HKT's telephone business, CyberWorks hasn't proved it can earn revenue, he said. It plans to gain a 10 percent share of Asia's Internet industry by 2003
``I hesitate to call anything else a business when there is no meaningful revenue,'' Tomter said. ``The rest is a concept.''
CyberWorks shares began to slide in March alongside Internet stocks listed on the U.S. Nasdaq Stock Market. They tumbled further this month after GigaMedia, one of Taiwan's largest Internet service providers, pulled out of a venture to distribute video content online, and CMGI Inc., a U.S.-based Internet investment company, scrapped plans to start a fund with CyberWorks.
Investors had hoped that C&W would sell its CyberWorks stake to a global telecommunications company that could provide the Hong Kong company with additional expertise and money for those plans.
``If they'd been able to place the shares with a global telecoms company, they would have been better off,'' said Husan Pai, senior fund manager at Indocam Hong Kong Ltd., which manages $3 billion in Asia and says CyberWorks is worth buying at HK$9. ``Probably they shopped around for that.''
A Cable & Wireless spokesman in London declined to comment, as did a CyberWorks spokeswoman in Hong Kong.
Cable & Wireless shares fell 46 pence, or 4 percent, to 994p.
Cable & Wireless sold about $500 million worth of CyberWorks stock on Aug. 29, exchanging it for shares of CMGI.
Valuation
Cable & Wireless's remaining 19.1 percent stake in CyberWorks was worth as much as $5.44 billion at the sale price announced today, according to Bloomberg calculations.
That reduces the total value of its transaction with CyberWorks, including cash and the CMGI stake, to $12.4 billion from $15.7 billion when it closed on Aug. 17 and $18.3 billion when they first reached agreement in February. The value has dropped 32 percent since February.
The fall of the pound against the U.S. dollar and Hong Kong dollar this year, however, reduces that drop for Cable & Wireless, which reports its earnings in pounds. The transaction is now worth 8.5 billion pounds in total, according to Bloomberg calculations. That means the value has declined 18 percent since the closing and 27 percent since February.
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