I Squared Capital has agreed to pay HK$14.5 billion (US$1.9 billion) in cash to buy the fixed-line assets of billionaire Li Ka-shing’s (李嘉誠) Hong Kong telecommunications business, giving the investor group control of a fiber-optic network serving corporate customers and residents.
Hutchison Telecommunications Hong Kong Holdings Ltd (和記電訊香港) shares surged as much as 15 percent, the biggest intraday increase since 2011, as of the noon break in Hong Kong trading yesterday.
The company announced the agreement in a stock exchange statement on Sunday. The assets included are owned by closely held unit Hutchison Global Communications Ltd (和記環球電訊).
Photo: Bloomberg
For I Squared Capital, founded by former Morgan Stanley Infrastructure Partners dealmakers, the agreement comes about a month after it said it was seeking US$5 billion for a global fund to invest in power, transportation and utilities companies.
The deal is valued at about 11 times earnings before interest, taxes, depreciation and amortization (EBITDA), said Gautam Bhandari, a partner at I Squared.
That compares with the 13 times EBITDA median of 10 telecommunications services deals in developed Asia-Pacific markets over the past three years, according to data compiled by Bloomberg.
“We’ve been looking at telecom infrastructure for quite some time trying to find the right asset,” Bhandari said in a phone interview. “And this high-quality asset came at the right time.”
Credit Agricole SA, Credit Suisse Group AG and Deutsche Bank AG have underwritten about US$800 million in financing for I Squared Capital’s deal, people familiar with the matter said.
The lending may be offered in general syndication later, the people said.
I Squared won out over bidders including a consortium of MBK Partners and TPG Capital, which had been preparing financing for an offer, people familiar with the matter said earlier.
The agreement follows the sale of Wharf Holdings’s (九龍倉集團) Hong Kong Internet provider for US$1.2 billion to a private-equity buyer group last year.
The consortium of MBK Partners and TPG Capital beat out other suitors including HKBN Ltd (香港寬頻) and SmarTone Telecommunications Holdings Ltd (數碼通), people with knowledge of the matter said at the time.
Hutchison Global serves nine of the top 10 global investment banks, and a majority of Hong Kong government departments and public hospitals, and is an accredited service vendor with the territory’s stock exchange, according to its Web site.
The company’s fiber-optic broadband network covers more than 1.8 million households and also carries traffic for wireless customers, according to Hutchison Telecom’s annual report.
“It’s a premium asset with very long-term contracts with mobile operators and large businesses,” Bhandari said. “And this stood out for all the defensive characteristics and good returns.”
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