Hutchison Telecom shares jump on US$1.9b deal to sell fixed-line unit

HONGKONG: Hutchison-Telecommunications Hong Kong Holdings Ltd shares jumped almost 15% when it started trading on Monday, a day after it announced the sale of its fixed-line business for about US$1.9bil.

Hutchison Telecom, a unit of Hong Kong’s richest man Li Ka-Shing’s CK Hutchison Holdings, said in a filing last Sunday that it had agreed to sell its fixed-line telecoms business to I Squared Capital for HK$14.5bil 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 represented about 12 times HGC’s earnings before interest, taxes, depreciation and amortisation, a source close to the deal told Reuters.

Hutchison Telecom said it expected to make a profit of HK$5.8bil (US$742.71mil) on the sale of HGC.

Hutchison Telecom shares have risen nearly 23% 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 would 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 US$1.22bil 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% 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$7.02bil (US$900mil) 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 US$5bil, 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.