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Telstra sells Autohome for AU$2.1b

Despite continuing court action in the Cayman Islands brought by minority shareholders, Telstra has completed the sale of Autohome for AU$2.1 billion.
Written by Corinne Reichert, Contributor

Telstra has sold 47.4 percent of total shares in Chinese online company Autohome to Chinese insurer Ping An Insurance Group for AU$2.1 billion.

Telstra is expecting to record an accounting gain of around AU$1.8 billion, subject to adjustments such as foreign exchange rates.

Earlier this month, Telstra CEO Andrew Penn announced that the Autohome shares sale would fund a capital management program of AU$1.5 billion for the second half of calendar 2016.

"Most of the proceeds from this sale will be used to fund a capital management program of at least AU$1.5 billion to commence in the first half of the 2017 financial year. We will provide more detail on the capital management program at our full-year results in August," Penn reaffirmed on Thursday morning.

"Autohome has been an excellent investment for Telstra, and we are pleased to have realised significant value for Telstra shareholders through this sale."

The definitive monetary amount, timing of delivery, and nature of the return of capital to shareholders is yet to be determined by the company, and is conditional on regulatory approvals, Penn said during Telstra's Investor Day 2016 presentation.

"I am pleased that we are able to confirm such a significant capital management program as the result of active management of our investment portfolio. Given our recent announcement of the sale of Autohome shares, we believed it was important to provide the market with further information about how we intend to use those funds," Penn said at the time.

"While specific details of the nature of the capital management program are yet to be confirmed, creating this type of shareholder value is in accordance with our capital management framework. Importantly, we also maintain sufficient capacity to invest in our growth plans for the future."

Telstra said it would announce more details during its full-year results presentation on August 11.

The sale, which was first announced in April, also sees Telstra retain a 6.5 percent stake in Autohome, and the telco still has one director on the board of the auto company.

The telecommunications giant added that there remains "residual litigation" on the sale of Autohome, and that Telstra is contesting this; last month, minority shareholders of Autohome filed a petition in court relating to Telstra's attempt to sell the company.

"A petition has been filed in the Cayman Island courts by certain minority shareholders of Autohome relating to the sale of Autohome shares by Telstra to Ping An," Australia's incumbent telecommunications provider said in a market update to the Australian Securities Exchange (ASX) at the end of May.

"Telstra intends to contest the petition."

Autohome CEO James Qin had also made a bid alongside with private equity firms Sequoia China and Boyu Capital and investment firm Hillhouse Capital to buy out Telstra's stake for $31.50 per share.

Telstra has owned shares in Autohome since 2008, and has been investing significantly in the Asian region for the past few years, most notably acquiring Pacnet for $697 million in December 2014.

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