PCCW Buyout Vote Under Swirl of Suspicion

PCCW is holding an extraordinary general meeting Wednesday with regards to a proposed $2.1 billion privatization bid. However, the deal is under scrutiny amid claims that unknown parties may have tried to illegally influence the outcome of today's vote.

David Webb, editor of, told CNBC's Asia Squawk Box that he received an anonymous tip about three weeks ago, alleging several hundred Fortis agents would receive 1,000 shares each in PCCW, in return for their 'Yes' votes at the shareholder meeting.

Exposing PCCW

Under the proposed deal, a group led PCCW's CEO Richard Li, will buy the 52 percent of shares owned by the public at HK$4.50 a share, a 7.3 percent premium to Tuesday's closing
price of HK$4.17.  Li and his affiliates will then own about two-thirds of the company, while an arm of China Unicom will hold the rest.

(Watch the full interview with David Webb on the PCCW buyout)

"I went down to the registrar last week after the Chinese New Year holidays to find evidence of this. What I found was that on 21st January, there were several hundred transfers of 1,000 shares each on the register, which is quite unusual because most shareholdings in Hong Kong are electronic," Webb said

Webb went back and checked a sampling of 30 names (alphabetic range from Chan F to Chan P) and compared those names with the insurance agents register in Hong Kong. Twenty-two of the 30 names matched insurance agents from Fortis Asia.

The information was forwarded to Hong Kong's Securities and Futures Commission and the Independent Commission Against Corruption.

At the offer price, 1,000 shares would net each investor HK$4,500. Trading in shares of PCCW was suspended on Wednesday pending the release of results of the reconvened court meeting and the reconvened shareholder meeting, the company said in a statement.

PCCW has said that it would look into these allegations and that it had no knowledge of any improper share transfers. The telco added it would report any evidence of impropriety to the authorities and that it would review its share register between December and January. 

Webb conceded that there probably wasn't any wholly criminal activity as such, but rather an attempt to exploit an obscure piece of law. 

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"Today's vote has three requirements -- it needs 75 percent of the shares voted in favor, it needs not more than 10 percent of the minority shares against, and it needs a majority by the number of shareholders who vote. So if 500 shareholders vote, and 251 of them, regardless of the number of shares they hold, vote in favor, it passes. If they vote 251 against, then it fails," Webb explained.

PCCW's stock closed sharply higher Tuesday after the fixed-line telecom company denied knowledge of any improper share transfers. But the market is divided on the likely outcome of
Wednesday's vote and the implications of the likely regulatory investigation into the vote-rigging allegation.