HONG KONG – Private equity groups and investment houses are lining up to buy a stake in a new media and telecoms company being separated out of Hong Kong conglom PCCW.
U.S. investor Texas Pacific Group and Korea's MBK made firm offers for HKT according to local reports which said that a total of eight companies had made bids by the deadline at 6pm Monday (July 14). Others are believed to include Blackstone, Providence Equity Partners, Kohlberg Kravis Roberts and Macquarie. Bids are expected close to $3 billion.
PCCW, which is controlled by Richard Li Tzar-kai, has grouped together its fixed line phones business, which holds a near monopoly position in Hong Kong, one of the territory's six mobile phones carriers and NOW TV. Now is a pioneering IPTV broadcaster and tech player which has now overtaken its cable rival as the biggest pay-TV provider in the territory.
Move is something of repeat of the high-profile sell off that Li and PCCW attempted two years ago. That deal was halted by China's Hong Kong and Macao Affairs Office, which objected to foreign ownership of Hong Kong's telephone network and by minority shareholders in Singapore.
This time, in order to achieve Chinese approval, control is not on offer and PCCW is only selling a 45% stake in HKT. Making the deal harder for investors to judge is the amount of debt that PCCW wants HKT to take on board. Investment bank UBS is advising PCCW on the deal.
It is not clear whether companies from China will join the bidding. China Netcom already owns a 20% stake in PCCW. But were it to raise its stake, there would likely be objections in Hong Kong of further mainland encroachments on Hong Kong's separate identity and legal status.
Last year the unit had revenues of $2.6 billion, up 13% on the previous period. Cash flow as measured by earnings before interest, taxes, depreciation and amortization rose 12% to $899 million.
(Story revised and updated 11.45, Tues July 15.)
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