Hong Kong tycoon can't buy son's shares

By MIN LEE

HONG KONG

Hong Kong tycoon Li Ka-shing's attempt to buy the shares of his younger son, Richard, in the territory's dominant phone company was rejected by shareholders Thursday, ending an extended business drama that saw the scion struggling to emerge from the shadow of his father.

Minority stockholders of Pacific Century Regional Developments Ltd., or PCRD -- a Singapore-based company controlled by Richard Li -- rejected a proposal to sell its 22.7 percent stake in Hong Kong fixed-line operator PCCW Ltd. for 9.16 billion Hong Kong dollars ($1.2 billion).

The vote marked PCCW Chairman Richard Li's failure to either reform or drop out of a floundering business venture that has struggled to live up to its aspiration of becoming a regional high-tech powerhouse.

Earlier, the 40-year-old Li -- nicknamed "Little Superman" after his billionaire father Li Ka-shing, who's known as "Superman" for his business acumen -- tried to sell PCCW's core telecom and media assets to Australia's Macquarie Bank and U.S. private equity company Newbridge Capital, a unit of Texas Pacific Group.

The talks were eventually called off because of objections from major shareholder China Netcom.

Richard Li instead opted for a share sale that was later complicated by his father's participation.

He announced in July an agreement to sell PCRD's stake in PCCW to a group of investors led by Francis Leung, a longtime financier for the elder Li.

Leung's financial backers weren't known at the time, but they eventually included Spanish telecommunications company Telefonica SA and two foundations run by Li Ka-shing, the world's 10th richest man according to Forbes magazine and head of a business empire that includes property, retail and port operation.

At an extraordinary general meeting in Singapore Thursday, 76.3 percent of minority holders voted against the deal.

The vote on whether to sell the PCCW stake was left to minority holders because the Singapore stock exchange banned Richard Li from voting due to his father's involvement in the proposed deal.

Once Li Ka-shing's involvement in the deal became known, apparent tension between father and son surfaced.

In a letter on the deal written to Hong Kong lawmakers two weeks ago, Richard Li said when he signed the share sale deal with Leung, he was especially sensitive about the possible involvement of his father and asked Leung about it repeatedly, but was told the elder Li wasn't a participant.

"This issue was so important that I asked Mr. Leung this question more than once," the younger Li said. He referred to his father in the letter as "Mr. K.S. Li."

The younger Li wrote that when his father's investment in the deal became known later, "I regret that this was the case."

Richard Li said outright last week that he opposed the deal, reversing his earlier position, saying he would "be very happy" if the offer for PCCW shares was rejected.

Li was quoted by government-owned radio RTHK on its Web site as saying Thursday the PCCW board respects the vote by PCRD's minority shareholders, and he and China Netcom will continue to find ways to improve the returns of PCCW's shareholders.

Financier Leung has suggested Richard Li's purported opposition to his father's role in any share sale may be disingenuous.

He been quoted as saying after he learned of Richard Li's displeasure at Li Ka-shing's participation in the transaction, he offered to drop the deal altogether but the younger Li didn't accept.

The possible sale of Richard Li's shares in PCCW to his father is a thorny issue because it could be perceived as father bailing son out of a business venture marred by failures.

Richard Li started out working at the Li family's satellite TV station STAR. In 1993, he sold STAR to media mogul Rupert Murdoch's News Corp. in 1993 for $950 million.

The same year, Li used the proceeds from the sale to set up Pacific Century Group, which would later launch PCCW. In 2000, PCCW gained notoriety by buying phone company Cable & Wireless HKT in a stock-and-cash deal on the calculation that fixed-line revenue would fund profitable high-tech ventures.

Li's personal stature grew, as the press -- including Time and Fortune magazines -- featured him on numerous covers and described him as an ambitious, bright young entrepreneur and a new Internet giant.

PCCW, however, was grounded by the dot-com bust. Critics charged that its businesses were too far-flung and unfocused. Its shares plummeted.