-- Cheung Kong, CKI consortium to buy U.K. gas distributor for
US$1 billion
-- The deal will boost Cheung Kong's business portfolio in the
U.K.
-- Shares of Cheung Kong Infrastructure suspended from
trading
(Recasts 1st paragraph, adds context, details on fundraising by
CKI in 4th paragraph, background.)
By Joanne Chiu
HONG KONG--A consortium led by Hong Kong billionaire Li
Ka-shing's flagship Cheung Kong (Holdings) Ltd. (0001.HK) and its
infrastructure unit has agreed to buy a major U.K. gas-distribution
company for 645 million pounds sterling (US$1.0 billion),
increasing the Hong Kong group's exposure to the U.K. utilities
sector at a time of slow growth in its saturated home market.
The Cheung Kong group has a wide-ranging U.K. business
portfolio, covering telecommunications, ports, water utilities, and
energy, and Mr. Li's companies have been increasingly looking
abroad for possible acquisitions to broaden their revenue base.
Word of the latest deal comes as Cheung Kong Infrastructure
Holdings Ltd. (1038.HK), a utility and infrastructure company
directly controlled by Li's conglomerate Hutchison Whampoa Ltd.
(0013.HK) and one of the leaders of the consortium pursuing the gas
distributor deal, has been building a war chest to continue its
hunt for overseas for utilities assets.
The company is now preparing for its third major fundraising
activity of the year, with plans to raise up to US$405.2 million
for general working capital via a new share placement, according to
a term sheet seen by Dow Jones Newswires on Tuesday. That comes
after it raised 2.3 billion Hong Kong dollars (US$295 million)
through a share placement in March, and another HK$2.3 billion by
issuing fixed rate callable perpetual securities in February.
CKI Chairman Victor Li said last week the company has more than
HK$8 billion in cash on hand and is in a very strong position to
make acquisitions. It posted an 18% rise in first-half net profit
thanks to a strong contribution from recently acquired U.K.-based
Northumbrian Water Group PLC.
CKI's assets in the U.K., the company's largest market,
accounted for nearly half of its net profit for the period. The
contribution from the U.K. also rose 45% from a year earlier to
HK$2.72 billion.
Apart from Hong Kong and the U.K., CKI has investments in
mainland China, Australia, the U.K., Canada, the Philippines and
New Zealand, with businesses ranging from electricity generation to
water and natural gas supply.
In the latest deal, the companies in the consortium said in a
joint statement that they agreed Wednesday to buy MGN Gas Networks
(UK) Ltd., which owns U.K. gas distributor Wales & West
Utilities Ltd., from a number of investment and fund management
firms, including Macquarie Global Infrastructure Funds 2 SARL.
The partners in the consortium are Cheung Kong, CKI, electricity
company Power Assets Holdings Ltd. (0006.HK), and Li Ka Shing
Foundation Ltd., with the first three each holding a 30% stake in
the joint venture company. Li Ka Shing Foundation will hold the
remaining 10% stake, the statement said. CKI owns 38.87% of Power
Assets.
The companies also said they will pay for the acquisition with
internal resources.
Wales & West Utilities is principally engaged in the
management of gas transportation assets, gas distribution and meter
work services throughout Wales and southwest England.
The company's regulated network supplies 7.4 million customers
within an area of 42,000 square kilometers, or almost one-sixth the
area of the U.K., the statement said, with the length of main gas
pipeline totaling 35,000 kilometers.
The gas distributor recorded a net loss of GBP63.1 million for
the year ended March, compared with a net loss of GBP62.5 million a
year earlier, according to the statement.
CKI is due to hold a news conference to discuss the deal at 0500
GMT.
A consortium led by CKI completed its 3.8 billion Canadian
dollar (US$3.7 billion) acquisition of Northumbrian Water, which
provides water and sewerage services to 4.5 million people, from a
group including Ontario Teachers' Pension Plan, one of Canada's
three biggest pension funds last year. In 2010, a consortium led by
CKI and Power Assets bought U.K. Power Networks from Electricite de
France SA for GBP5.78 billion. CKI and Power Assets each own a 25%
stake in Seabank Power Station, a 1,140 megawatt gas-fired power
station near Bristol in the U.K., for HK$2.4 billion.
CKI halted its Hong Kong-listed shares from trading at 0100 GMT
Wednesday, but declined to provide a reason for the move. Its
shares ended 0.4% higher at HK$49.25 Tuesday.
Write to Joanne Chiu at joanne.chiu@dowjones.com
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