Exchange to probe PCCW over disclosure
Saturday, February 8, 2003
BEN KWOK, MATTHEW BROOKER, HUI YUK-MIN and RAYMOND MA
The stock exchange will investigate Hong Kong's dominant telecommunications company, PCCW, over concerns that it misled investors about a reported $30 billion takeover attempt.
PCCW denied in an announcement to the exchange on Thursday that it had made a takeover offer for Cable & Wireless, only to admit hours later in a statement to London regulators that it had made a preliminary approach to the British company.
PCCW, controlled by Richard Li Tzar-kai, yesterday insisted it had not misled the market, but critics accused it of playing with words.
The company issued its first announcement in response to a newspaper report that it had made a takeover approach to C&W, which was rebuffed by the British company's new chairman, Richard Lapthorne, last month.
"The company would like to confirm that it did not make a takeover offer to [C&W]," it said. "Further, the company is not engaged in any negotiations with C&W or any other prospective transaction."
In its second statement, issued on Thursday night, PCCW said: "The company confirms that a preliminary approach was made to the chairman of C&W by way of letter dated December 31, 2002, indicating an interest in engaging in discussions regarding a possible takeover offer."
"Throughout all of this we have not tried to mislead at all, and we have followed and adhered to every stock exchange and regulatory requirement," PCCW spokesman Martin O'Connor said yesterday.
Mr O'Connor said the company had not disclosed the initial approach to C&W because the Hong Kong exchange had not asked about it. The exchange had only asked whether the company had made a takeover offer for C&W, which it had not, he said.
It issued its second statement after being asked by the UK Takeovers Panel to clarify "exactly what the situation is", he said.
Hong Kong Exchanges and Clearing spokesman Henry Law was unimpressed. "It's not a matter of whether we ask or not. Listed companies have an obligation under the listing rules to fully disclose price-sensitive information in a timely fashion."
Others were more blunt. Independent legislator Henry Wu King-cheong, who represents the broking industry in Legco, said: "If you take the analogy of a car accident, then this is like them coming out and issuing a statement that nobody was hurt, but at the very bottom they write in small type that somebody died.
"I don't think this reflects on a problem within the stock exchange but one within PCCW," Mr Wu said.
Christfund Securities managing director Christopher Cheung Wah-fung agreed. "It's misleading. The company should have made the same disclosure to investors in both markets."
Credit-rating agency Moody's gave PCCW an instant vote of no-confidence, placing the group's ratings on review for possible downgrade.
"Previously the company had been focused on organic growth of its existing businesses but the recent takeover approach to C&W is evidence of an intention to now consider growth through acquisitions," Moody's said.
The C&W approach is the latest in a series of controversies over PCCW's disclosure and corporate governance record. Mr Li, the son of tycoon Li Ka- shing, admitted two years ago that his company had for years falsely described him as a Stanford University graduate.
The company has also faced criticism over its high director salaries and its accounting policies.
"I don't see any issue with our corporate governance at all," Mr O'Connor said.
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