Hutchison to sell fixed-line unit to I Squared Capital for HK$14.5b
American private equity firm I Square Capital has won the bidding competition to acquire Hutchison Global Communications (HGC), the fixed-line phone and Wi-Fi services unit of Hong Kong's wealthiest business magnate Li Ka-Shing.
HGC, a subsidiary of publicly traded Hutchison Telecommunications, is being offloaded for HK$14.5 billion. The value may be adjusted based on debt, working capital, and other financial information by the time of closing.
Hutchison expects to generate approximately HK$5.8 billion in profit through the sale, according to a filing to the Hong Kong stock exchange, which will allow it to invest more into its mobile services business.
The fixed-line unit -- which provides a 1.4 million kilometre fibre-optic network connecting to more than 14,000 buildings as well as 25,000 Wi-Fi hotspots -- operates in Hong Kong and China, while serving businesses in Africa, Europe, the Middle East, and the US.
Private equity firms including a consortium consisting of TPG Capital and South Korean billionaire Michael Kim's MBK Partners has also submitted bids earlier this month, but withdrew from the bidding war due to concerns over valuations and potential anti-trust regulatory issues, according to a report by Reuters.
In its half-year results ended June 30, 2017, HGC reported earnings before interest, tax, depreciation, and amortisation (EBITDA) of HK$656 million. In the previous corresponding period in 2016, HCG reported HK$669 million in EBITDA.
CK Hutchison Holdings, which owns 66.1 percent of Hutchison Telecommunications, will vote all its shares in favour of the acquisition in a shareholders meeting yet to be scheduled.
The transaction is expected to close by October and is the first deal under I Squared's second fund, which is raising up to $5 billion.
Under the terms of the agreement, HCG employees will continue to be employed for a minimum of 12 months following the closure of the deal.