PCCW Ltd., Hong Kong’s biggest phone company, won shareholders’ approval to spin off a telecommunications business trust, clearing the way for a possible $1.3 billion initial public offering.
The proposed spinoff of HKT Trust was backed by more than 99 percent of votes cast by shareholders at a meeting in Hong Kong yesterday, PCCW said in a statement to the Hong Kong stock exchange. The plan required the support of more than 50 percent of participating shareholders.
Billionaire Chairman Richard Li plans to use proceeds from the proposed listing of HKT Trust to pay down PCCW’s debt and invest in computer services and pay-television operations. The planned offering will proceed if a minimum valuation of HK$28.6 billion ($3.7 billion) is achieved for the trust, which will control PCCW’s businesses including fixed-line, mobile-phone and broadband Internet, according to Li.
Proceeds from the offering of HKT will allow PCCW to invest in faster-growing businesses, Li said. Telecommunications operations are more “defensive” assets, he told shareholders yesterday.
PCCW shares fell 0.3 percent to HK$2.89 in Hong Kong trading yesterday, and have declined 16 percent this year. The company has a market capitalization of HK$21 billion, based on yesterday’s closing price.
The proposed spinoff is at least the sixth attempt since 2006 to reorganize PCCW. Li, PCCW’s biggest shareholder and son of Cheung Kong (Holdings) Ltd. Chairman Li Ka-shing, failed to buy out minority shareholders and delist the company in 2009, after unsuccessful attempts in the previous three years to sell down his interests in PCCW.
PCCW may sell 36.7 percent of HKT Trust to raise net proceeds of about HK$10 billion, the company said last month. The carrier plans to use the proceeds to reduce debt, which amounted to HK$27.2 billion at a net level at the end of June, according to its first-half earnings report.
PCCW said previously it will retain majority ownership of HKT Trust.
Richard Li increased his stake in PCCW to 27.6 percent from 27.5 percent, after acquiring 6.56 million shares on Oct. 10, according to a stock exchange filing yesterday. He said yesterday he won’t reduce his stake in PCCW and HKT Trust after the spinoff.
PCCW aims to complete the listing of HKT Trust in the first week of November, two people with knowledge of the matter said this month. The company may start gaging investor demand in the middle of this month, the people said.
The decline in global stock markets last quarter prompted companies including Sany Heavy Industry Co. to delay or cancel share sales in Hong Kong.