HONG KONG (Thomson Financial) - Shares of Hong Kong's largest railway operator MTR Corporation were suspended from trading on Tuesday morning ahead of an extraordinary general meeting later in day with shareholders due to vote on the company's proposed merger with rival Kowloon-Canton Railway Corporation (KCR).
Analysts are betting that MTR's minority shareholders will approve the long-awaited merger, which will make MTR the largest public transport utility in the territory with a 40 percent market share.
The minority shareholders will meet at 11.00 am and at least 50 percent of their vote is required for implementation of the merger.
The government, which is a 76 percent shareholder in the company, is not allowed to vote.
The remaining 24 percent stake is almost equally divided between institutional and retail investors who have in the past raised concerns over a fare freeze, loss of fare autonomy and additional variable costs that MTR would have to bear if the merger goes through.
In a research note last week, Morgan Stanley said chances of the merger being rejected are pretty low because of the 'value-accretive nature of the merger'.
According to Morgan Stanley estimates, the merger with KCR is expected to add 4.4 Hong Kong dollars per share to MTR's net asset value, taking it to 21 dollars per share.
However, the company's shares surged sharply last week on expectations of approval for the merger plan and Morgan Stanley analysts say valuations are stretched at current levels.
The securities firm has an 'underweight' rating on the stock with a target price of 19 dollars.
MTR's shares rose 40 cents or 1.6 percent to 25.60 dollars on Monday.
(1 US dollar = 7.8 Hong Kong dollars)
parvathy.ullatil@thomson.com
pu/cl - pu/ng/cl COPYRIGHT Copyright Thomson Financial News Limited 2007. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.
© 2007 AFX News
