A consortium led by local financier Francis Leung Pak-to has offered to buy PCCW chairman Richard Li Tzar-kai’s entire 26 percent stake in the company at HK$6 per share, which informed sources say is much more likely to succeed than buyout deals tabled earlier by foreign venture capital firms.The offer values the stake at about HK$10.5 billion and represents a 9.1 percent premium to PCCW’s closing price of HK$5.5 Friday.

Leung’s proposal falls far short of the HK$55 billion offered by Australia- based Macquarie and HK$57 billion proposed by US-based Newbridge Capital for core telecoms and media assets of PCCW.

Contacted Sunday night by The Standard, Li refused to comment.

PCCW’s board is due to meet this morning and it is not known if Leung’s buyout bid will be discussed.

Sources close to the deal, however, insist that despite the substantially low bid, the new proposal is sound because it is unlikely to face any opposition from state-owned China Netcom Group, which holds a 20 percent stake in PCCW.

Also, Li seems intent on securing a buyer and may even facilitate some sort of shareholder financing in order to conclude the transaction.

“Richard Li is keen on selling his stake or even the entire core assets of PCCW. He hopes the deal can be completed in a short period of time,” another source said.

Li may also be willing to accept a relatively long payout period - as long as two years, the source said.

China Netcom has opposed bids by Macquarie and Newb
ridge to buy into the company, saying it is “not willing to see any change to the Hong Kong ownership of PCCW or its assets.”

The new offer will let Netcom keep control of PCCW’s core assets and may give it a larger say in the direction of the company.

“China Netcom could still implement the on-going projects with PCCW in the mainland even though the controlling shareholder has changed,” the source said.

Therefore the new bid, if it succeeds, would ensure PCCW retains a good relationship with China Netcom Group.

Contacted last night by The Standard, a Netcom executive said the company has not heard about the new proposal and that it remains opposed to PCCW acquiring new shareholders.

He stated that Netcom has no intention to either increase or decrease its stake in PCCW for the time being.

Since the consortium led by Leung is seeking a stake below the 30 percent threshold, it does not have to make a general offer for the whole company.

This would give Richard Li more flexibility, allowing him to circumvent the PCCW board in forging a deal.

The proposal, unlike the offers from Macquarie and Newbridge Capital, has been made directly to Li.

Leung, is one of the city’s best- known investment bankers.

He has been called “godfather of the red chips” for his role in bringing some of the mainland’s largest state-owned companies to the Hong Kong stock market in the 1990s when he was a senior banker at BNP Paribas and has played a significant role in many major IPOs in the past decade.

He remains as consultant to Citigroup after stepping down as its Asia chairman earlier this year.

PCCW’s financial adviser Lehman Brothers is expected to be present at the board meeting today.