Boto sale passes despite opposition


Critics of the sale contend it is underpriced and say Hong Kong is a 'minefield' for minority investors

HONG KONG, China -- Shareholders of Boto International Holdings Ltd. voted Monday to sell the heart of the company to U.S. investment fund Carlyle Group.

The controversial sale came despite minority-shareholder opposition and complaints that stockholders were being shortchanged.

Boto is selling its key artificial Christmas-tree and garden-furniture business to a new shell company, Greenland International Holdings.

Carlyle Group has agreed to pay HK$1.06 billion ($136 million) for a 75 percent stake in Greenland. Boto's shareholders will hold the remaining 25 percent.

Boto's independent shareholders voted 53 percent to 47 percent in favor of the sale. That leaves those opposed to it with no recourse.

"We're out of options. We lost," shareholder activist David Webb told CNN. He believes most of the independent votes in favor of the sale had ties to management.

Victory for Boto's chairman

The sale is a victory for Boto Chairman Michael Kao, who controlled more than 60 percent of Boto's shares but had to abstain from the voting.

Shareholders will receive 26 Hong Kong cents per share for their holdings. The stock had been trading at 36 cents a share before the deal was announced.

Besides 25 percent of the Christmas tree business, Boto will also own a computer-animation startup company run by Kao's son, Francis Kao.

Carlyle retains the right to buy Boto's 25 percent stake for HK$88 million if Chairman Michael Kao resigns.

Webb remains frustrated that he and his backers were unable to block the Carlyle sale. Independent financial adviser Anglo Chinese Corporate Finance also came out this month against the sale.

Decks 'stacked' against shareholders

"In Hong Kong, the decks are firmly stacked against independent shareholders," Webb explained on his advocacy Internet site, www.webb-site.com.

He said the Boto sale is symptomatic of the lack of controls protecting small stock holders and called the Hong Kong market a "minefield" for investors.

"Minority shareholders must stand and fight for their rights and more importantly campaign for a more level playing field without the landmines," he said.

Original proposals called for Boto to spin off all of its operations to a shell company controlled 70 percent by Carlyle and 30 percent by Kao.

But that plan was scrapped amid heavy opposition, leaving the shareholders with their 25 percent stake. "That's better than nothing, we did get something," Webb said.

Critics of the sale failed to muster sufficient support from institutions, some of which elected to cut their exposure to the company.