Hong Kong billionaire Li Kashing and his eldest son Victor Li are stepping up efforts to boost the stock of family business CK Asset Holdings, after HK$4.4 billion ($760 million) of personal purchases of the company’s shares failed to reverse slumping prices.
Li’s charity, the Li Ka Shing Foundation, is selling four companies holding stakes in infrastructure operations in the UK and the Netherlands, to CK Asset, for HK$17 billion in stock. To avoid diluting current shareholders, the company will buy back the same amount of shares from the market at an 8.4% premium to the previous closing price.
By undertaking its first buyback in about 2½-years, CK Asset is hoping to boost a share price that has slumped more than 16% since the start of 2019, compared with an 8% rise in the benchmark Hang Seng Index.
CK Asset, the real-estate flagship of the Li family’s CK Group, has seen its businesses including property development, aircraft leasing and pub operations hit hard after months of anti-Beijing protests in Hong Kong starting mid-2019 were followed by the coronavirus pandemic. CK Asset didn’t respond to requests for comment.
“One key message of this deal is that CKA isn’t abandoning” buybacks, Daiwa Capital Markets analyst Jonas Kan said in a note following the announcement. “We will not be surprised if CKA turns more active in buybacks in the future, which shall be supportive for its share price.”
The shares surged 7.2% the day after the deal was announced. They have since erased some of those gains, in line with a broader decline in the Hang Seng Index.
Further sweetening the deal, the foundation will ensure CK Asset receives dividends, interest and other cash distributions from the infrastructure assets of at least HK$910 million both this year and next. The company also promises higher dividends for those two years than were paid in 2020.
Yet the deal has left some investors questioning the company’s governance, with the arrangement allowing the Li family to increase its stake in CK Asset to as much as 45% from 36% currently.
Individual investor Benny Chung reduced his holdings partly because the deal appears to have increased the family’s control at the expense of minority shareholders, he said in a column posted online Monday. Despite the buyback premium, the HK$51 per share offer is still a 47% discount to the company’s net asset value, he said.
“The family is indirectly increasing its holding in CK Asset at quite a deep discount,” said analyst Raymond Cheng of CGS-CIMB. “Some shareholders aren’t very happy about that.” — Bloomberg
