PC CyberWorks (1186) to Win Takeover Battle
2000-02-29
The New York Times online version early this morning quoted
executives close to the takeover discussions that the Cable and
Wireless P.L.C. board of directors had selected Pacific Century
CyberWorks' cash-and-stock offer of about US$35 billion over
Singapore Telecom's comparable bid for C&W HKT (8). The
decision is expected to be announced as early as Tuesday in
Hong Kong.
The exact terms of the deal have yet to be announced, but
Financial Times said this morning that PCCW has increased the
offer to a US$38 billion (HK$296 billion) all-share bid with an
alternative US$35 billion (HK$273 billion) cash-and-shares
option including US$11.3 billion (HK$88 billion) in cash and a
US$700 million (HK$5.46 billion) dividend from HKT.
The increase in the cash component could be viewed as a
reaction to Singapore Telecom's uniting with Rupert Murdoch's
News Corporation in the battle for HKT. PCCW had offered
HK$7 cash and 0.7 share of PCCW for every share in C&W
HKT (8) before the Singtel-News Corp alliance.
If PCCW is to offer Cable & Wireless US$12 billion in cash
(US$700 million from HKT's reserve) the financial burden for
PCCW will be extremely high though not unbearable. Making
use of the exponential growth in its share price, the 10-month
old Internet start-up of Richard Li, has in the open market
raised some US$2.3 billion cash through a series of share
placements. The bid for HKT will use up all its cash reserve,
and the company will end up US$9 billion (HK$70 billion) in
debt if every shareholder opts for the cash-and-shares offer.
Interest expenses, at an assumed 10% rate, will amount to over
HK$7 billion per year.
It is fairly difficult to estimate the earnings of PCCW, but the
recurrent net income per year for HKT alone is at most HK$10
billion. The combined PCCW-HKT could be able to repay the
debts arising from the PCCW-HKT merger, but earnings for the
coming years will face a big hit. For the first full year after the
merger, PCCW-HKT's net interest expenses including the
reduction in interest income after the payment of US$700 million
special dividend will amount to HK$7.3 billion. Even if
PCCW-HKT's net earnings before interest expenses stayed at
the HK$10 billion level, then the net income after interest
expenses will be only HK$2.7 billion.
The combined market capitalisation of PCCW-HKT, based on
their last quoted prices, will be as high as HK$515 billion
(US$66 billion), surpassing Richard Li father's Hutchison
Whampoa (13), capitalised at HK$465 billion, to become the
Number Three biggest company on the Stock Exchange of
Hong Kong. With annual income of less than $3 billion, the
combined PCCW-HKT is valued at over 170 times its
prospective earnings. The future of the new baby could be
excellent, but it seems to be far too risky to buy PCCW-HKT
at the current price. (end)
Ja, da lassen wir uns dann mal vom neuen Kurs überraschen.
Da hat PCC einen grossen Brocken zu schlucken.
Hoffen wir das Beste.
CHECKIT
2000-02-29
The New York Times online version early this morning quoted
executives close to the takeover discussions that the Cable and
Wireless P.L.C. board of directors had selected Pacific Century
CyberWorks' cash-and-stock offer of about US$35 billion over
Singapore Telecom's comparable bid for C&W HKT (8). The
decision is expected to be announced as early as Tuesday in
Hong Kong.
The exact terms of the deal have yet to be announced, but
Financial Times said this morning that PCCW has increased the
offer to a US$38 billion (HK$296 billion) all-share bid with an
alternative US$35 billion (HK$273 billion) cash-and-shares
option including US$11.3 billion (HK$88 billion) in cash and a
US$700 million (HK$5.46 billion) dividend from HKT.
The increase in the cash component could be viewed as a
reaction to Singapore Telecom's uniting with Rupert Murdoch's
News Corporation in the battle for HKT. PCCW had offered
HK$7 cash and 0.7 share of PCCW for every share in C&W
HKT (8) before the Singtel-News Corp alliance.
If PCCW is to offer Cable & Wireless US$12 billion in cash
(US$700 million from HKT's reserve) the financial burden for
PCCW will be extremely high though not unbearable. Making
use of the exponential growth in its share price, the 10-month
old Internet start-up of Richard Li, has in the open market
raised some US$2.3 billion cash through a series of share
placements. The bid for HKT will use up all its cash reserve,
and the company will end up US$9 billion (HK$70 billion) in
debt if every shareholder opts for the cash-and-shares offer.
Interest expenses, at an assumed 10% rate, will amount to over
HK$7 billion per year.
It is fairly difficult to estimate the earnings of PCCW, but the
recurrent net income per year for HKT alone is at most HK$10
billion. The combined PCCW-HKT could be able to repay the
debts arising from the PCCW-HKT merger, but earnings for the
coming years will face a big hit. For the first full year after the
merger, PCCW-HKT's net interest expenses including the
reduction in interest income after the payment of US$700 million
special dividend will amount to HK$7.3 billion. Even if
PCCW-HKT's net earnings before interest expenses stayed at
the HK$10 billion level, then the net income after interest
expenses will be only HK$2.7 billion.
The combined market capitalisation of PCCW-HKT, based on
their last quoted prices, will be as high as HK$515 billion
(US$66 billion), surpassing Richard Li father's Hutchison
Whampoa (13), capitalised at HK$465 billion, to become the
Number Three biggest company on the Stock Exchange of
Hong Kong. With annual income of less than $3 billion, the
combined PCCW-HKT is valued at over 170 times its
prospective earnings. The future of the new baby could be
excellent, but it seems to be far too risky to buy PCCW-HKT
at the current price. (end)
Ja, da lassen wir uns dann mal vom neuen Kurs überraschen.
Da hat PCC einen grossen Brocken zu schlucken.
Hoffen wir das Beste.
CHECKIT
