Li Ka-shing's Possible 02 Deal Would Mark New Milestone
Today : Friday 23 January 2015
By Yvonne Lee
Li Ka-shing's potential $15 billion purchase of one of Britain's biggest cellphone operators would be the Hong Kong billionaire's biggest deal overseas yet, and would cement his telecommunications company as one of Europe's top wireless firms.
Just days after announcing a split of his Hong Kong business empire and announcing takeovers of a British maker of rolling stock and a Dutch drugstore chain, Mr. Li has gone back on the hunt.
Mr. Li's Hutchison Whampoa said Friday that it was in exclusive talks to buy O2 from Spain's Telefónica SA for GBP9.25 billion in cash, plus up to GBP1 billion in deferred upside interest-sharing payments, putting the potential total price tag for the U.K. wireless operator at more than GBP10 billion. It said the talks with Telefónica will be exclusive for a "period of several weeks."
The 02 purchase is set to be not only the acquisitive billionaire's biggest-ever foreign purchase, but also the largest purchase overseas by an Asian firm since Japan's SoftBank Corp. 's $21.6 billion buyout of Sprint Nextel Corp in Oct. 2012, according to Dealogic.
For 86-year-old Mr. Li, who has spent at least $35 billion in acquisitions since the 2008 financial crisis began throwing up good-value assets overseas, the deal is the latest in his ramp-up of European telecom assets.
In recent years, Mr. Li has bought Telefónica's Irish subsidiary, O2 Ireland, for about EUR850 million ($1.1 billion) and Orange Austria, the country's third-largest mobile operator for $1.7 billion from France Telecom SA. Mr. Li already owns the Three Mobile network in the U.K., Italy, Sweden, Denmark, Austria and Ireland. Three is Britain's fourth-largest wireless carrier, while O2 is the second biggest after EE.
Facing stalling revenue in fiercely competitive and mature markets in the region and encouraged by strong equity prices, European telecom companies are seeking tie-ups that will enable them to get bigger and more efficient.
For buyers like cash-rich Mr. Li, consolidating telecom assets adds steady cashflows to an empire anchored by volatile Hong Kong real estate holdings. Hong Kong has one of the fastest growing real-estate prices globally, but just 10 years ago was reeling from the 1998 financial crisis.
"An acquisition of O2 by Hutchison would create the largest U.K. mobile operator with 41% market share," UBS analyst Angus Chan said. However, such a big acquisition could be a stretch for Hutchison's balance sheet as the debt level of the new company, CK Hutchison Holdings Ltd, is likely to increase after the split of Mr. Li's holdings, the analyst said.
Hutchison Group Finance Director Frank Sixt said Friday the deal would be funded by bank loans and investment from institutional partners, including private-equity firms.
"We will ask some minority partners to join the investment," Mr. Sixt said, adding the company intends to sell no more than a 30% stake in the O2 deal to new partners.
Mr. Li earlier this month announced that he was stripping out the real-estate assets held by his two main Hong Kong listed companies: Cheung Kong Holdings Ltd and its 49.97%-owned Hutchison Whampoa, whose assets, besides telecom, range from holdings in ports around China, drugstores, as well as a stake in Canadian oil company Husky Energy Inc. This week, Mr. Li's companies announced a purchase of Dutch drugstore chain Dirx Drugstores as well as a GBP1 billion purchase of the U.K.'s Eversholt Rail Group.
The real-estate assets will be listed separately as Cheung Kong Property Holdings Ltd while the remaining assets will be held in CK Hutchison Holdings Ltd.
Mr. Li entered the mobile telecommunications market in 1983 and now has 73 million active customers across the world.
Hutchison's Three Group Europe operations posted a 3% increase in total revenue to HK$31 billion ($4 billion) for the six months ended June 2014. Its core earnings, or earnings before interest, tax, depreciation and amortization, rose 15% to HK$6.5 billion in the same period. Mr. Li also has cellphone operations in his Hong Kong under the Three brand.
Today : Friday 23 January 2015
By Yvonne Lee
Li Ka-shing's potential $15 billion purchase of one of Britain's biggest cellphone operators would be the Hong Kong billionaire's biggest deal overseas yet, and would cement his telecommunications company as one of Europe's top wireless firms.
Just days after announcing a split of his Hong Kong business empire and announcing takeovers of a British maker of rolling stock and a Dutch drugstore chain, Mr. Li has gone back on the hunt.
Mr. Li's Hutchison Whampoa said Friday that it was in exclusive talks to buy O2 from Spain's Telefónica SA for GBP9.25 billion in cash, plus up to GBP1 billion in deferred upside interest-sharing payments, putting the potential total price tag for the U.K. wireless operator at more than GBP10 billion. It said the talks with Telefónica will be exclusive for a "period of several weeks."
The 02 purchase is set to be not only the acquisitive billionaire's biggest-ever foreign purchase, but also the largest purchase overseas by an Asian firm since Japan's SoftBank Corp. 's $21.6 billion buyout of Sprint Nextel Corp in Oct. 2012, according to Dealogic.
For 86-year-old Mr. Li, who has spent at least $35 billion in acquisitions since the 2008 financial crisis began throwing up good-value assets overseas, the deal is the latest in his ramp-up of European telecom assets.
In recent years, Mr. Li has bought Telefónica's Irish subsidiary, O2 Ireland, for about EUR850 million ($1.1 billion) and Orange Austria, the country's third-largest mobile operator for $1.7 billion from France Telecom SA. Mr. Li already owns the Three Mobile network in the U.K., Italy, Sweden, Denmark, Austria and Ireland. Three is Britain's fourth-largest wireless carrier, while O2 is the second biggest after EE.
Facing stalling revenue in fiercely competitive and mature markets in the region and encouraged by strong equity prices, European telecom companies are seeking tie-ups that will enable them to get bigger and more efficient.
For buyers like cash-rich Mr. Li, consolidating telecom assets adds steady cashflows to an empire anchored by volatile Hong Kong real estate holdings. Hong Kong has one of the fastest growing real-estate prices globally, but just 10 years ago was reeling from the 1998 financial crisis.
"An acquisition of O2 by Hutchison would create the largest U.K. mobile operator with 41% market share," UBS analyst Angus Chan said. However, such a big acquisition could be a stretch for Hutchison's balance sheet as the debt level of the new company, CK Hutchison Holdings Ltd, is likely to increase after the split of Mr. Li's holdings, the analyst said.
Hutchison Group Finance Director Frank Sixt said Friday the deal would be funded by bank loans and investment from institutional partners, including private-equity firms.
"We will ask some minority partners to join the investment," Mr. Sixt said, adding the company intends to sell no more than a 30% stake in the O2 deal to new partners.
Mr. Li earlier this month announced that he was stripping out the real-estate assets held by his two main Hong Kong listed companies: Cheung Kong Holdings Ltd and its 49.97%-owned Hutchison Whampoa, whose assets, besides telecom, range from holdings in ports around China, drugstores, as well as a stake in Canadian oil company Husky Energy Inc. This week, Mr. Li's companies announced a purchase of Dutch drugstore chain Dirx Drugstores as well as a GBP1 billion purchase of the U.K.'s Eversholt Rail Group.
The real-estate assets will be listed separately as Cheung Kong Property Holdings Ltd while the remaining assets will be held in CK Hutchison Holdings Ltd.
Mr. Li entered the mobile telecommunications market in 1983 and now has 73 million active customers across the world.
Hutchison's Three Group Europe operations posted a 3% increase in total revenue to HK$31 billion ($4 billion) for the six months ended June 2014. Its core earnings, or earnings before interest, tax, depreciation and amortization, rose 15% to HK$6.5 billion in the same period. Mr. Li also has cellphone operations in his Hong Kong under the Three brand.
