International -- Finance: Investment Funds
Regent Pacific: What's Going On Here? (int'l edition)
It paid a pretty penny for its chairman's e-holdings
Some businesses will do whatever they can to get online. Regent Pacific Group Ltd., Hong Kong's only listed investment firm, simply bought out its chairman's own Internet holdings, which included an e-tailer and a Web site offering free horoscopes.
In Hong Kong, backdoor listings and the injection of family assets into public companies are nothing unusual, of course. And Regent shareholders, who had all the information they could ask for, approved the deal on May 21. "There's nothing sinister about it," says James Mellon, the 42-year-old chairman.
But the deal was plenty sweet for Mellon. He increased his stake in Regent from 12.8% to 29.9% in return for a grab-bag of Net holdings that accounting firm KPMG valued at $81.5 million on March 15. The share price for iRegent.com, as it's now called, has halved since then. Mellon's shares are still worth about $46 million, though. He spent less than $8 million to assemble his tech portfolio in the first place. Mellon says he's not just cashing out of untested Net businesses. "I have never sold a single share of Regent and have no intention of doing so," he says.
Mellon says he wants to remake the company for the Internet age. Already, Regent had a 46.2% stake in Korea Online, a financial services firm. But Mellon's holdings seem a curious addition. A single business--BigSave.com Ltd., an online shopping mall based on the Isle of Man--accounted for most of his portfolio's value. Soon after he started BigSave in 1999, Mellon began to work with Robert Owen, chairman of Internet incubator techpacific.com Ltd. in Hong Kong. Owen, a Regent board member, became an early investor in BigSave. Then techpacific.com helped bring in institutional investors, who paid as much as $3 a share. That enabled Mellon to value BigSave at about $110 million, even though it had revenues of $478,301 in 1999 and a net asset value of $4.8 million. Analysts now question the prospects of many e-tailers. But Mellon says the site should be profitable by 2001.COSY. In turn, the fees techpacific.com earned from the BigSave placements accounted for 65% of the incubator's $1 million in revenues in 1999. And that helped techpacific attract investors to its April initial public offering. Meanwhile, iRegent owns 5.66% of techpacific, and techpacific has the option to buy 7% of BigSave's shares once it goes public. "It's a tidy little circle, isn't it?" says David M. Webb, editor of Webb-site.com, a Hong Kong corporate watchdog. Owen dismisses any criticism, saying: "As is normal for an investor in a new venture, [Mellon] used techpacific's corporate finance services, giving it an income stream in its early stages."
This isn't the first time Mellon has abruptly revamped Regent. The business attracted attention in the early 1990s by raiding closed-end mutual funds. After the 1997 Asian financial crisis, Mellon focused on Eastern European equities and Russian bonds. The group got creamed when Russia defaulted in 1998. "Mellon can go after a new idea at 100 miles an hour," says Peter Churchhouse, managing director of Morgan Stanley Dean Witter Hong Kong. "But this time he's slower and has to make up for lost time." And in the Net age, if a company moves too slowly, it may just be lost.By Frederik Balfour in Hong Kong