The ultimate controlling shareholder of construction firm Paul Y-ITC, Charles Chan Kwok-keung, has sparked concern by revealing plans to purchase 'non-core assets' from the firm at a 90.1 per cent discount to their book value.
As a result ITC Corp, the vehicle through which Mr Chan controls Paul Y, will incur an HK$809 million loss and could cause investors to lose confidence in firms whose shares trade at sharp discounts to their net asset value, commentators said.
Paul Y said the deal had been proposed by Mr Chan and not the firm's board, but admitted the offer's terms could disadvantage shareholders.
'The board of directors of Paul Y [other than Mr Chan] considers that the consideration . . . may not be fair and reasonable,' the company said in a statement yesterday.
However, the deal 'provides [independent shareholders] with an opportunity to receive a significant portion of their investment in cash under the current difficult market condition', it said.
Hong Kong Institute of Investors chairman Ricky Tam Siu-hing said Mr Chan's purchase could dampen investors' confidence in buying 'cheap' stocks trading at big discounts to their fundamental value.