**************
Following is the transcript of the media session by the Financial Secretary, Mr Henry Tang, on the negotiation of a possible merger of two rail companies at the ground floor lobby of the Central Government Offices West Wing this afternoon (February 24):
Financial Secretary: Earlier the Government announced that we had invited the two rail companies to negotiate a possible merger on a commercial basis. I believe that we have arrived at a very good proposal that the two rail companies should complete the negotiation in six months' time. We believe that some of the conditions are ripe for such a merger. After successful negotiation, there will be a combined company that will become beneficial to the riders, the Government, as well as to the rail companies.
Question: What role do you see for the merger of the companies? Do you see the minority shareholders will be bought out in this merger?
Financial Secretary: The possible merger of the two rails is something that we believe will benefit not only the rail companies, but also the riders in general. Balancing the budget is not a primary concern in this respect. I believe that the benefit will be derived from a pricing mechanism and also the synergies that will be derived from the merger. So all parties could win in this kind of negotiation.
We have no intention of buying out the minority shareholders. They are key factor in this negotiation because ultimately the Government is a connected party and we will not be exercising our (right as the) majority shareholder in the vote of MTRC on whether to accept the proposal or not. The minority shareholders, about 400,000 of them, will ultimately make their decisions. I think this is a very democratic process.
Question: How will the Government actually benefit from it, financially and the long-term target.........from the merger of the two companies?
Financial Secretary: The key question here will be whether the minority shareholders perceive or the investors in general can see that the value of the sum is greater than the value of the individual parts. A merger will create synergies which will create better value for shareholders and the Government will derive the benefit from a greater value.
Question: Is there an estimate of how much that increase in value will be?
Financial Secretary: Yes, our financial advisers have given us some figures but I am not in a position to release those figures because we would like to negotiate as good a deal for the Government as possible.
Question: Do you have an idea of how essential will the merger help alleviate the fiscal deficit?
Financial Secretary: We are not looking to balance our fiscal deficit with this kind of merger. This kind of merger would primarily create synergies, add value to the company and also would be beneficial to the ridership. We are not looking for any short-term monetary gain from it although we will probably end up with some.
(Please also refer to the Chinese portion of the transcript.)
Ends/Tuesday, February 24, 2004
NNNN
