Minority shareholders withstand Hong Kong tycoon
Shareholders have rejected proposals by Hong Kong tycoon Li Ka-shing to merge Power Assets Holdings (PAH), a cash-rich energy subsidiary, with Cheung Kong Infrastructure (CKI), a global conglomerate with holdings ranging from transport to waste management. Such a deal would have allowed CKI, which Mr Li controls, to tap into PAH’s cash holdings of $8.8 billion for acquisitions. Approximately half of the minority shareholders in PAH voted against the plan. Critical reports issued by Institutional Shareholder Services and Glass Lewis had claimed that the offer was unfair to these shareholders.

HONG KONG likes to think of itself as a bastion of global capitalism. Unlike politicised and parochial financial centres on the Chinese mainland, locals claim, their transparent markets protect the rights of minority investors. As evidence, they point to the fact that Hong Kong refused to let Alibaba list on its stock exchange last year, because the Chinese e-commerce giant’s management wanted to use a dual-share structure that limited the rights of minority shareholders. That rebuff forced Alibaba to move its $25 billion listing to New York.

The growing influence of mainland regulators and tycoons in the former British colony makes this boast look implausible at times, but something remarkable happened this week in Hong Kong. Li Ka-shing, a local tycoon nicknamed “Superman” for his business acumen, is in the midst of reorganising his vast business empire. As part of this effort, Mr Li wants to merge Power Assets Holdings (PAH), a cash-rich energy firm, with Cheung Kong Infrastructure (CKI), a global conglomerate with holdings ranging from transport to waste management. Such a deal would allow CKI, which Mr Li controls, to tap into PAH’s cash holdings of $8.8 billion for acquisitions.

Superman usually gets what he wants, but not this time. On November 24th shareholders rejected his $12.4 billion proposal to combine the two entities. About half of the other shareholders in PAH voted against the plan. They were emboldened by critical reports issued by Institutional Shareholder Services and Glass Lewis, two firms that advise investors on how to cast their votes, which argued that although Mr Li had sweetened the terms of his offer, it was still too stingy to PAH’s other shareholders.

The vote represents a setback for Mr Li, not Kryptonite. His plan to shift the focus of his investments from the Chinese mainland to Europe, Australia and elsewhere will continue. CKI cannot make another bid for PAH for a year; but since the two firms share several directors, other ways may be found (a special dividend, say) for the former to get its hands on the latter’s cash. The octogenarian’s plan to hand the running of his empire to his elder son, Victor, is unlikely to be affected. Even so, it was a good day for capitalism in Hong Kong.