By Joanne Chiu And Wayne Ma
HONG KONG-- Hutchison Whampoa, Asian billionaire Li Ka-shing's
acquisitive conglomerate, said Friday that Singapore and Abu
Dhabi's sovereign-wealth funds are among investors paying up to
GBP3.1 billion ($4.7 billion) for a third of the Hong Kong
company's soon-to-be enlarged British cellphone operations.
The stake sale is in line with Hutchison's strategy of using as
little debt as possible to pay for acquisitions, which have
accelerated this year in Europe. Earlier this year, Hutchison,
already owner of U.K. wireless company Three, said it was buying
U.K. mobile-phone operator O2 from Spain's Telefonica SA for
GBP9.25 billion, plus up to GBP1 billion later if the newly
combined company meets cash-flow targets. The stake sale will
reduce Hutchison's outlay by a third.
The deal is one of the biggest European transactions this year
and combining O2 with Three would create Britain's biggest
cellphone operator by subscribers.
At the time the deal was announced, Hutchison Finance Director
Frank Sixt said it would bring in other investors that were "the
right compatible partners." On Friday, Hutchison named five that
will buy a total stake of 32.98% in the combined 02-Three: Two of
Canada's biggest pension funds, the Canada Pension Plan Investment
Board and Caisse de Depot et Placement du Quebec, Singapore's
sovereign-wealth fund GIC Pte. Ltd., Brazilian investment bank BTG
Pactual and Abu Dhabi Investment Authority.
The five will pay GBP2.8 billion in total for the stakes, and
add a further GBP329.8 million if the combined company meets
cash-flow targets.
Hong Kong-based Hutchison, whose global holdings range from
ports to energy assets, said in a statement that the proceeds from
the stake sale, along with a GBP6 billion loan from HSBC Holdings
PLC and GBP480 million from other company sources, would be used to
fund the O2 deal, which awaits European Union regulatory
approval.
CPPIB and the Caisse de Depot are Canada's two biggest pensions
funds, together overseeing a total of about 464.7 billion Canadian
dollars (US$383.1 billion) in assets, and are active global
investors in public and private markets. The funds' investment in
Hutchison 3G UK Holdings (CI) Ltd. is consistent with their focus
on investing in assets that generate steady cash flow for meeting
long-term pension liabilities.
The telecom sector "is where innovation and growth is happening,
and (Europe) is one of the major telecom markets of the world,"
Andreas Beroutsos, head of private equity and infrastructure at the
Caisse de Depot, said in a phone interview.
Establishing a relationship with Hutchison could also generate
opportunities for the Quebec pension fund to participate in future
deals with the Hong Kong conglomerate, Mr. Beroutsos said.
Mark Jenkins, Senior Managing Director & Global Head of
Private Investments at CPPIB, said buying into the combined
cellphone operator would give the Canadian pension plan "a
meaningful stake in a leading mobile operator."
"We expect this investment will generate attractive long-term
risk-adjusted returns, which is appealing for an investor like
CPPIB, " said Mr. Jenkins.
Singapore sovereign-wealth fund GIC said its investment for the
initial stake will be GBP1.1 billion, assuming EU regulators
approve Hutchison's acquisition and the combination of the phone
companies takes place. GIC has been building up assets across the
globe from sectors spanning property to technology. Earlier this
year, it bought 5% stake of U.S. information and television ratings
company Nielsen NV, a deal valued at over $800 million. and bought
British roadside-assistance provider RAC from Carlyle Group LP.
The O2 purchase would cap a reversal of fortune for Mr. Li's
European telecommunications business, which spent almost a decade
in the doldrums, and triple Three's U.K. subscribers to 34 million.
Mr. Li has been on a buying spree in Europe since the financial
crisis, snapping up asses that include water and waste-management
utilities.
He is taking advantage of relatively cheaper companies and
picking up assets that offer a steady cash flow, while at the same
time reducing exposure to Hong Kong and China. Earlier this year,
Mr. Li announced a string of deals in Europe that included
takeovers of a British train-car maker and a Dutch drugstore
chain.
Ben Dummett in Toronto and PR Venkat in Singapore contributed to
this article.
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