Hong Kong court approves PCCW buyout

HONG KONG (Reuters) - A Hong Kong court said it would allow controlling shareholders of PCCW (0008.HK) to proceed with a $2.2 billion privatization of the telecom firm after finding against the city's securities watchdog in a case over alleged vote buying.

The Securities and Futures Commission (SFC) quickly said it will file an appeal against the decision allowing a company associated with PCCW Chairman Richard Li, and China Netcom, to proceed with their buyout offer.

"I have concluded that the statutory majority who voted for the scheme were acting in bona fide (good faith) and were not coercing the minority in order to promote an interest adverse to those of the class whom they represented," the verdict issued by High Court Judge Susan Kwan said.

The court rejected the SFC's request to suspend the ruling or to hold up the privatization process any further and also approved a proposed reduction in the company's capitalization.

Controlling shareholder Li, through his company Pacific Century Regional Developments (PCEN.SI) (PCRD), and China Netcom, which is now part of China Unicom (0862.HK), offered to buy out minority shareholders for HK$4.20 a share last November. They sweetened the offer to HK$4.50 a share in December.

But the SFC began probing alleged improper share transfers at PCCW under the privatization deal proposed by PCRD and Netcom in February.

The investigation began after shareholder activist David Webb said in January he had received an anonymous email alleging PCCW shares were offered to insurance agents in exchange for supporting the buyout offer.

SFC lawyers said of the 1,404 shareholder votes cast in early February in favor of the privatization deal, 849 looked suspicious as they might have included those given out as bonus shares to the insurance agents, who were formerly PCRD employees.

Both PCRD and Li have denied any involvement in any improper activities and said that the process had complied with legal requirements.

PCCW shares have been suspended since pre-opening last Wednesday, pending the court decision. The stock last traded at HK$3.98, an 11.6 percent discount to the offer price.

(Reporting by Joanne Chiu and Nerilyn Tenorio; Editing by Lincoln Feast)