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Following is a question by the Hon Emily Lau and a reply by the Secretary for Financial Services and the Treasury, Mr Frederick Ma, in the Legislative Council today (November 8):
Question:
In mid-June this year, PCCW Limited (PCCW) consecutively received expressions of interest from two foreign companies in relation to the acquisition of substantially all the telecommunications and media-related assets of PCCW. Nevertheless, the proposed acquisition fell through due to opposition from China Network Communications Group Corporation, the second substantial shareholder of PCCW. Then, on July 9, Pacific Century Regional Developments Limited, the major shareholder of PCCW listed on Singapore Exchange, sold all its shares in PCCW, which were approximately 23%, to a company controlled by a Hong Kong businessman. The businessman did not disclose the source of funds for the stock transaction at the time, and it was not until the end of September that he informed the Singapore Exchange that the HK$500 million deposit concerned was derived from funds drawn on a facility provided by the father of the Chairman of PCCW. In this connection, will the Executive Authorities inform this Council:
(a) given that foreign companies are not forbidden by law from holding shares in local telecommunications companies, whether the Government has taken any actions in respect of the intended acquisition of PCCW's assets by the two foreign companies, leading to the termination of the acquisition;
(b) given that while the stock transaction mentioned above involved a change in a substantial shareholder of a listed company, the acquirer was not required to make offers to all the shareholders to buy their shares for the reason that the percentage of shareholdings involved was lower than the triggering point of 30% stipulated in the Codes on Takeovers and Mergers and Share Repurchases, whether the authorities will review if the relevant requirements are sufficient for protecting the rights and interests of the minority shareholders; and
(c) whether they will consider following the practice of the Singapore Exchange to require the purchaser to disclose the source of funds whenever an acquisition involves significant changes in shareholdings?
Reply:
Madam President,
I would like to clarify that our securities regulator, i.e. the Securities and Futures Commission, does not comment on individual cases.
The Administration's response to the three questions raised by the Member is as follows:
(a) As rightly pointed out by the Hon Emily Lau, foreign companies are not forbidden by law from holding shares in local communications companies. But any acquisition plan would certainly need to comply with the relevant laws and licensing conditions. In general, the Administration would not interfere with the business activities of commercial organisations. The Administration and the relevant regulators would act in accordance with the relevant laws and licensing conditions.
(b) The Codes on Takeovers and Mergers and Share Repurchases (the Takeovers Code) are published by the Securities and Futures Commission (SFC) under the Securities and Futures Ordinance, and are enforced by the SFC. In October 2001, the threshold for triggering mandatory offers was reduced from 35% to 30% following public consultation. Before this change the trigger level had been set at 35% since the introduction of the Takeovers Code in 1981. The reduction to 30% reflected market sentiment that 30% represented a more realistic level at which effective control passes and also brought Hong Kong into line with the UK and the PRC at the time. The 30% threshold is consistent with the current threshold adopted in a number of jurisdictions including the UK, the PRC and Singapore.
(c) The SFC and the Hong Kong Exchanges and Clearing Limited (HKEx) are not aware of any provision in the Singapore Listing Rules which requires disclosure of the source of funding for acquisitions of substantial interests in a listed company.
The regulatory requirements of the Hong Kong's securities market are on a par with international standards. The SFC and HKEx have been keeping the regulatory requirements under regular review in tandem with international trends and market development, with a view to preserving and strengthening the competitiveness of Hong Kong in the international financial markets.
Thank you, Madam President.
Ends/Wednesday, November 8, 2006
Issued at HKT 11:52
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