Hong Kong tycoon Li Ka-Shing’s conglomerate Hutchison Whampoa has raised £3.1bn, from a collective of savings and pension funds, to finance its acquisition of the O2 mobile operator in the UK.
In March, Hutchison agreed to buy O2 from its Spanish owner Telefónica for £9.25bn, with a further maximum of £1bn due upon completion. It plans to combine the business with its existing UK network Three, to create Britain’s largest mobile operator with 33 million customers and the country’s most extensive 4G internet service.
On Friday Hutchison announced a deal to sell one third of the combined business to a multinational group of investors led by the Canada Pension Plan Investment Board (CPPIB), which will invest a £1.1bn share alongside Singapore sovereign wealth fund GIC Pte, Caisse de dépôt et placement du Québec, Limpart Holdings, a wholly owned subsidiary of the Abu Dhabi Investment Authority, and Brazilian investment bank BTG Pactual.
Hutchison Whampoa’s group managing director Canning Fok said: “Like us, the willingness of these investors to commit substantial capital to this investment reflects continued confidence in the UK economy and its commitment to maintain and foster a dynamic and world leading telecommunications sector, as well as a vote of confidence in Europe’s plans for a single market in digital communications, leading to increased investment in the telecoms sector.”
The collective has agreed to pay £2.77bn in cash on completion of the deal, with a further maximum of £330m dependent on cash flows at the combined O2 and Three businesses by the time the deal completes.
Hutchison will fund the rest of the purchase using a bank facility of £6bn. Completion is expected in 2016 but the merger must first secure approval from the EU competition authorities.
“This is an exceptional opportunity to acquire a meaningful stake in what will become a leading mobile operator in the UK, giving us immediate scale in an important sector,” said Mark Jenkins, of CPPIB.
Hutchison signalled early on that it was likely to fund the acquisition of Three’s larger UK rival O2 by selling a stake to outside investors. CPPIB’s potential involvement was rumoured in February, when it was reported to be in discussions with Hutchison along with another Canadian entity, the Ontario Teachers Pension Plan.
