An Internet investment company run by the son
of a top Hong Kong tycoon agreed today to buy the territory's big
phone company for up to $38.1 billion after a rival from Singapore
bowed out of the bidding.
The upstart Pacific Century CyberWorks Ltd., controlled by
billionaire Li Ka-shing's son Richard Li, is less than a year old
and has yet to turn a profit. But it pulled off one of Asia's
biggest corporate takeovers with its agreement to purchase Cable &
The merged company will be called Pacific Century CyberWorks
The deal announced today still needs approval by the board of
Cable & Wireless HKT, which is 54 percent held by its British
parent, Cable and Wireless PLC, which cut the deal with Li's
Pacific Century CyberWorks said it would pay $38.1 billion in
stock, or it is also offering a cash-and-stock alternative that
values Cable & Wireless HKT at $35.9 billion.
The higher price would give Cable & Wireless HKT shareholders 38
percent more than what their stock was worth when Li's group first
announced the merger talks in mid February, but it's 6 percent less
than the price Cable & Wireless HKT fetched at the close on Friday.
Li's company is borrowing most of the needed cash and said it
will pay out no more than $11.3 billion in cash in the deal.
The exact value of the deal will likely change as stock prices
fluctuate. Shares in Cable & Wireless HKT and Pacific Century
CyberWorks were both kept off the market today as details of their
deal dribbled out.
Singapore Telecommunications Ltd. had never announced the size
of its earlier bid. But it pulled out of the running today with a
statement touting the "solidity and stability" of its failed
attempt to create a regional telecommunications powerhouse.
The night before, SingTel had staged a dramatic effort to boost
its earlier bid by joining forces with media baron Rupert Murdoch's
The 33-year-old Li appeared jubilant early today as he stopped
to chat briefly with reporters on his way into the meeting with
analysts. Li's company will hold some 37 percent of the merged
group, group managing director Alex Arena said afterward.
Arena said Cable & Wireless PLC will retain about 20 percent of
the merged group. Other stakeholders with smaller but significant
shares will include China Telecom (Hong Kong) Ltd., CMGI Inc. and
Li, whose startup Internet group has been on a buying binge,
called the phone company "the best platform to develop Asia,"
though he would not be drawn on any specific strategy.
Li said there were no plans to cut costs by laying off staff.
The battle for control of Cable & Wireless HKT began in January,
when SingTel said it was in negotiations that could merge the Hong
Kong and Singapore phone companies.
The news stirred talk of a more rapid opening of Asia's
telecommunications markets, many of them tightly controlled by
regulations that have not permitted the types of freewheeling
takeovers that are reshaping the telecommunications industries in
the United States and Europe.
Hong Kong and Singapore have two of the more liberalized
markets, and analysts said creating a regional group made some
sense at a time when both are beginning to face stiffer competition
on their home turfs.
But Hong Kong and Singapore are traditionally fierce business
rivals, and the idea that Singapore could end up calling the shots
at the local phone company stirred considerable opposition here.
Pacific Century CyberWorks soon entered the picture, bringing
the considerable clout that the Li family wields in Hong Kong.
There has been much speculation none of it confirmed that
Beijing preferred to see the Hong Kong phone company remain under
"It's got the influence of the Chinese government written all
over it," said Dwayne Taylor, an analyst at Robert Fleming
Amid signs a deal was drawing near, Pacific Century CyberWorks
suspended its shares from trading on the Hong Kong Stock Exchange
on Friday. Cable & Wireless HKT took its shares off the market on
Monday and said a deal seemed imminent.