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Pricewaterhouse to take over Andersen HK-China

Partners in the Hong Kong and China unit of Andersen said on Thursday they would combine with PricewaterhouseCoopers, wiping the embattled US accounting firm's name from the region as an early step in its break up.

The move comes as Andersen is defending itself against federal charges of obstruction of justice in the United States over destroyed Enron Corp and talks with various groups over regional mergers, including "Big Five" rival KPMG in Europe.

"It's a combination of firms. We'll have a combined workforce of 6,000 in Hong Kong and China," PricewaterhouseCoopers regional marketing director Cynara Tan told Reuters.

About 2,400 Andersen staff, of which 900 are from Hong Kong and the rest from China, will join the combined entity, which will operate under the name PricewaterhouseCoopers.

When asked if there would be job cuts, Tan said: "Our priority is the needs of our clients."

She said it was too early to say how the arrangement would affect PricewaterhouseCoopers' revenue in Hong Kong and China.

Andersen said it would benefit from the arrangement.

"Whilst we remain deeply upset by the events affecting Andersen in the USA which have led to this development, we have no doubt that joining PricewaterhouseCoopers offers great opportunities and benefits for our firm, our people and -- above all -- our clients," Andersen Greater China managing partner Albert Ng said.

A spokeswoman for Andersen said the two sides preferred not to call the deal a merger due to "legal implications." She declined to elaborate.

Andersen, the smallest of the world's "Big Five" accounting houses, on Wednesday pleaded not guilty to the felony obstruction of justice charge, for which it faces fines of up to $500,000 and as much as five years probation.

Andersen and KPMG confirmed earlier this week they were in merger talks on operations outside the United States.

In London on Thursday, KPMG's European chairman Mike Rake told BBC Radio that the charges and scandal over its auditing role in the collapse of Enron made it impossible for Andersen to continue as an independent global firm.

"People will simply not take their business to it," Rake said.

The role of Andersen's Hong Kong operations in an aborted stock listing of printing firm JW International Holdings Ltd last July is currently under review as part of a study by the Hong Kong Society of Accountants.

Andersen withdrew its audit report published in JW International's prospectus after anonymous letters were sent to the Hong Kong stock exchange authorities alleging the prospectus overstated revenue. Andersen said it had done nothing wrong.

JW International cancelled its listing and refunded HK$81 million to investors.

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