Billionaire Li Ka-shing’s (李嘉誠) Hutchison Whampoa Ltd (和記黃埔) offered to take a phone unit private for HK$4.23 billion (US$545 million) in cash after the stock underperformed the Hong Kong benchmark index for three years.
Hutchison Whampoa yesterday said it would seek the 40 percent of Hutchison Telecommunications International Ltd (和記電訊國際) it doesn’t own for HK$2.20 a share, or 33 percent more than the stock’s last price before trading was suspended on Jan. 4. The phone unit’s shares rose as much as 30 percent after the offer, which exceeded estimates by analysts at Credit Suisse Group AG.
Hutchison said that the buyout would allow the phone company to plough cash back into expanding its operations in emerging markets including Indonesia and Vietnam.
Hong Kong’s richest man, who amassed an estimated US$16.2 billion expanding into everything from real estate to energy and retail, has been purchasing shares of his own companies after they trailed gains in the Hang Seng Index last year.
MARKET EFFECT
Hutchison Telecom shares rose 28 percent to close at HK$2.12 in Hong Kong on the resumption of trading after the stock was suspended on Jan. 4 pending yesterday’s announcement. Hutchison Whampoa shares were unchanged at HK$56.60 after the offer, which is being arranged by Goldman Sachs Group Inc.
Hutchison Telecom will probably post a HK$1.02 billion loss this year as the company increases spending to expand in Indonesia and Vietnam, according to the median of four analysts’ estimates compiled by Bloomberg. It sold a controlling stake in Israel’s Partner Communications Ltd, its biggest earnings contributor, for 5.29 billion shekels (US$1.4 billion) in October, and also operates units in Sri Lanka and Thailand.
In 2007, the Hong Kong carrier sold its controlling stake in Vodafone Essar Ltd., India’s third-biggest wireless operator, for US$10.7 billion.
The offer is valued at 1.2 times Hutchison Telecom’s June 30 book value per share. That trails the 1.7 multiple average in the MSCI Asia Pacific Telecommunication Services Index. Li took the company public more than five years ago.
WARNING
The billionaire earlier on Thursday said investors should look for more proof the recession has given way to economic growth before buying into stocks, saying share prices had “run ahead of economic fundamentals.”
“It’s better to be careful. The world has just emerged from the financial crisis,” Li told reporters at a convention center in Hong Kong on Thursday.
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