I Square Capital to acquire Hutchinson Global Communications
31 July 2017
US private equity firm I Square Capital has won the bidding competition for the acquisition of 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, with the value likely to be adjusted on the basis of debt, working capital, and other financial information by the time of closing.
The sale is expected to net around HK$5.8 billion in profit according to a filing with the Hong Kong stock exchange, which will allow it to invest more into its mobile services business.
The fixed-line unit provides a 1.4 million kilometre fibre-optic network connecting to over 14,000 buildings as also 25,000 Wi-Fi hotspots. It operates in Hong Kong and China and serves businesses in Africa, Europe, the Middle East, and the US.
According to a Reuters report, private equity firms including a consortium comprising TPG Capital and South Korean billionaire Michael Kim's MBK Partners had also submitted bids earlier this month, but withdrew from the bidding war over concerns related to potential anti-trust regulatory issues.
In its half-year results ended 20 June, 2017, HGC reported earnings before interest, tax, depreciation, and amortisation (EBITDA) of HK$656 million, while in the previous corresponding period in 2016, HCG reported HK$669 million in EBITDA.
The deal marks the third sale of a major fixed-line network business in Hong Kong since last year.
The share price of Hutchinson Telecom, has been increasing since mid-May, and hit a 21-month closing high of HK$3.04 on 18 July as speculation grew over the bidding for HGC assets. The company's shares closed at HK$2.81 on Friday.
''Through the transaction, the company will receive substantial proceeds, which will enable the company to continue to invest and strengthen its leading market position in the mobile business, while maintaining a strong financial profile,'' South China Morning Post reported.