HONG KONG (BLOOMBERG) - Power Assets Holdings Ltd. shareholders rejected a US$12.4 billion (S$17.5 billion) buyout offer from billionaire Li Ka-shing, dealing a rare setback for Hong Kong's richest man as he seeks to consolidate his utilities and infrastructure businesses before handing over control of his empire to his elder son Victor.
Mr Li, making his offer through Cheung Kong Infrastructure Holdings Ltd., failed to get enough Power Assets minority shareholders voting at a meeting on Tuesday to approve the deal, according to a statement to the Hong Kong exchange. In order to go through, the proposal needed at least 75 per cent of votes cast by minority shareholders to approve the transaction. Only 50.8 per cent did.
Earlier this month, influential proxy advisers Institutional Shareholder Services Inc. and Glass Lewis & Co. recommended investors vote against Mr Li's offer, defying a man who's so revered in Hong Kong for his business acumen that he's known as "Superman".
The 87-year-old tycoon, who merged his two flagship units earlier this year, is seeking to consolidate his business empire before he retires.
CKI had offered 1.066 of its shares for every one of affiliate Power Assets, a transaction valued at US$12.4 billion based on their latest stock prices. It had also proposed a special dividend of HK$7.50 per share payable to the combined company's shareholders after the deal.
Both companies said in separate statements they were disappointed with the outcome of the meeting.
In addition to failing to get enough votes, about 26 per cent of Power Asset's minority investors rejected the deal. In order to go through, no more than 10 per cent of those shareholders could turn down the proposal.
Because of the vote results, CKI won't be able to make another attempt to buy Power Assets for another year.
At Tuesday's vote, journalists weren't allowed into the meeting venue and executives dodged reporters' questions as they made their way out from the hours-long session. Some investors voiced frustration with the offer.
"No one from management could persuade some of us to vote in favor of the offer because it isn't justifiable," said Hui Ming-tak, who's held 4,000 shares of Power Assets for more than 10 years. "The deal is more tilted in favor of CKI than Power Assets."
The proposed merger, first announced on Sept. 8, would have given CKI full control of Power Assets' more than US$8.7 billion in cash and equivalents, which could be used to fund future acquisitions. After the deal, the Li family's CK Hutchison Holdings Ltd. would control the combined company with a 49 per cent stake.
In the past two years, CKI and Power Assets have bought assets including an Australian gas distributor, a Dutch waste processor, and an airport parking business in Canada. The combined company will own and operate utilities, waste management and transportation in China, Europe and Australia.