Hong Kong billionaire Li Ka-shing (李嘉誠) attracted investors from Singapore, Canada and United Arab Emirates to help fund Hutchison Whampoa Ltd’s (和記黃埔) ￡10.25 billion (US$16 billion) O2 acquisition and create the largest wireless carrier in the UK.
An affiliate of Singapore’s GIC Pte, Canada Pension Plan Investment Board and the Abu Dhabi Investment Authority are among investors that agreed to pay a combined ￡2.8 billion for a third of Hutchison’s merged UK wireless business, the Hong Kong-based company said yesterday. The investors may buy an additional ￡330 million in shares if the O2 purchase results in some extra interest payments, it said
For Li, 86, the investments help ease the financial strains of making his biggest-ever overseas acquisition as he expands in the European mobile-phone market. The phone deal also comes as Hong Kong’s richest tycoon overhauls his business empire before handing the reins to his eldest son, Victor Li (李澤鉅).
Photo: Bloomberg
“This is a very smart play,” said Francis Lun, chief executive officer of Geo Securities Ltd in Hong Kong. “I will classify this as a prudent move so as not to leverage too high because this is a major acquisition and will use up all the company’s resources.”
Shares of Hutchison Whampoa rose 1.4 percent to HK$110.90 in Hong Kong yesterday. The stock has gained 25 percent this year, while the benchmark Hang Seng Index has increased 16 percent.
Canada’s Caisse de Depot et placement du Quebec and Brazil’s Grupo BTG Pactual are also among the co-investors.
Hutchison, which operates mobile-carrier Three, earlier this year agreed to buy O2 UK from Telefonica SA, a merger that would create Britain’s biggest wireless provider by customers.
O2 said in March regulatory approvals might take a year, while Telefonica said it expected the transaction to be completed by June next year. When Hutchison merges its Three mobile business with O2, the combined entity will have about 30 million subscribers.
The deal — creating a company that serves 44 percent of all UK mobile-phone subscribers — deepens a push into the European telecommunications industry that Hutchison entered more than a decade ago.
While rising demand for faster mobile connections has helped Hutchison sign up users, offerings combining TV, Internet, landline and wireless service have recently gained popularity in Europe as consumers access video, music and social media on multiple devices.
The bundle gives operators a chance to discount services to attract new customers, and selling more than one product makes subscribers less likely to leave. Fewer than 2 percent of UK households bought all four services together, according to a report by regulator Ofcom last year.
Li is merging his two biggest companies and plans to spin off their real-estate assets into a separate unit later this year.
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