Cheung Kong's $12bn merger collapses

A $12.4 billion plan to merge Cheung Kong Infrastructure with Power Assets has been dealt a blow this week after 49.2 percent of the latter’s shareholders rejected the deal.

The Hong Kong-based companies needed approval from at least 75 percent of their shareholders, with no more than 10 percent voting against, in order to pass the proposal, according to filings.

Earlier this month, Institutional Shareholder Service and Glass Lewis, two proxy advisors, counselled Power Assets shareholders to vote against the merger offer, which they deemed too low.

First announced in September, the proposed merger was intended to provide CKI with access to Power Assets’ HK$67.8 billion (€8.24 billion; $8.75 billion) cash pile, which would have been used to fund future acquisitions.

Last month, CKI raised its offer from 1.04 to 1.066 of its shares for every Power Assets share it doesn’t already own. It had also proposed a special dividend of HKD7.5 per share, payable to the combined company’s shareholders after the deal. CKI already owns 38.87 percent stake of Power Assets.

The move was supposed to help Li Ka-Shing, an 87-year-old Hong Kong tycoon, further consolidate his business empire. Li earlier this year merged Cheung Kong and Hutchison Whampoa, his two flagship units, as part of a plan to hand over control of his conglomerate to Victor, his 51-year-old son.

Under Hong Kong’s securities regulations, CKI has to wait at least 12 months before making another offer for Power Assets.

CKI said in a statement that while the voting result was disappointing, it “will continue to move forward in our own strategies for growth” and “will build on the strength of our existing infrastructure portfolio and balance sheet to pursue new opportunities for expansion.”

The HK$173.6 billion CKI, which is chaired by Victor, has been actively acquiring infrastructure and telecommunications assets in Europe in the past two years, including Eversholt Rail, one of the UK’s three largest rail rolling stock leasing businesses.

Power Assets invests in power and utility-related businesses. Its investment portfolio spans the UK, Australia, New Zealand, China, Canada, Thailand and the Netherlands.