An influential proxy advisory firm has told minority shareholders of Power Asset Holdings to reject a US$12.3 billion buyout offer from tycoon Li Ka-shing’s Cheung Kong Infrastructure Holdings (CKI).
Institutional Shareholder Services (ISS) said on Monday that the all-stock offer from CKI for affiliate Power Assets should be improved by as much as 13 percent.
ISS also said that CKI’s special dividend should be paid before a deal goes through, not after as proposed by the Li firm, Bloomberg News reported.
The recommendation from ISS, which also flagged concerns about conflicts of interest, is the latest setback facing Li’s effort to merge his utility businesses, the report noted.
Investor opposition prompted CKI to sweeten its offer last month.
Under the revised proposal, CKI offered 1.066 of its shares per each Power Assets share plus a dividend of HK$7.50 conditional on the deal passing.
It marked an improvement from an original offer made in September, which entailed 1.04 CKI share per each Power Assets share and a conditional dividend of HK$5.0.
But the revised offer is still not good enough, says ISS, which provides advice to more than 1,600 institutional clients worldwide.
Considering the influence of ISS and the low bar needed to derail the transaction, CKI’s deal is “almost impossible” to pass unless it is sweetened further, according to CLSA analysts.
“CKI should step up to the game and make an offer investors can’t refuse,” the analysts were quoted as saying in a research note to clients Tuesday.
The Financial Times reported that another influential proxy adviser, Glass Lewis & Co., has also recommended investors to vote against the deal.
Power Assets shareholders are due to vote on Nov. 24 on the offer.
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