Hutchison Telecommunications Hong Kong Holdings Ltd shares jumped almost 15 percent when it started trading on Monday, a day after it announced the sale of its fixed-line business for about $1.9 billion. Hutchison Telecom, a unit of Hong Kong’s richest man Li Ka-Shing’s CK Hutchison Holdings, said in a filing on Sunday that it had agreed to sell its fixed-line telecoms business to I Squared Capital for HK$14.5 billion in cash. Proceeds from the sale of Hutchison Global Communications (HGC), which provides fixed-line phone services as well as Wifi all around Hong Kong, will be used for investment into mobile phone services and for working capital. The price represents about 12 times HGC’s earnings before interest, taxes, depreciation and amortization, a source close to the deal told Reuters.
Hutchison Telecom said it expected to make a profit of HK$5.8 billion ($742.71 million) on the sale of HGC. Hutchison Telecom shares have risen nearly 23 percent since May 16, when it acknowledged media reports about a potential sale of the fixed-line business. The HGC unit drew interest from several companies, including HKBN Ltd, SmarTone Telecommunications Holdings Ltd and a consortium of private equity firms TPG Capital Management LP and MBK Partners.
I Squared Capital won the deal partly because it will not face the same anti-trust scrutiny as some of the other bidders would, the source said. TPG and MBK teamed up to buy Wharf T&T – Hong Kong’s No.2 fixed-line operator for businesses last October from tycoon Peter Woo’s Wharf Holdings Ltd in a $1.22 billion deal.
The HGC deal is subject to shareholders’ approval and is expected to close in October, Hutchison Telecom said in the filing. The value of the deal may be adjusted at the time based on debt, cash levels and other financial data. CK Hutchison, which owns 66.1 percent of Hutchison Telecom, will vote all its shares in favour of the sale during an as-yet unscheduled extraordinary shareholders meeting.
I Squared has secured a HK$7.02 billion ($900 million) loan from Credit Agricole, Credit Suisse and Deutsche Bank to fund the HGC purchase, according to Basis Point, a Thomson Reuters publication. The three banks could not be immediately reached for comment. The firm, which invests in global infrastructure in energy, utilities and transport, is among potential buyers for Equis Energy, Asia’s largest independent renewable energy producer valued at up to $5 billion, sources have said.
Hutchison Telecom said it appointed Deutsche Bank and Goldman Sachs as financial advisers on the HGC transaction. Credit Suisse advised I Squared Capital on the transaction, according to another source familiar with the deal. The sale comes as Hutchison’s unit Hutchison Drei Austria announced on Friday an acquisition of landline-focused Tele2 from its Swedish owner for 95 million euros ($111 million).
Hutchison Telecom shares jumped almost 15 percent to a 21-month high earlier on Monday, and were trading up 10.32 percent at HK$3.10 apiece by 0526 GMT, versus the broader index that was up 1 percent.