CK to buy full control of Italy venture for $2.9 billion

CK to buy full control of Italy venture for US$2.9 billion. (Bloomberg pic)

HONG KONG: CK Hutchison Holdings Ltd. agreed to buy out its partner Veon Ltd. to take full control of their Italian mobile-phone joint venture for 2.45 billion euros (US$2.9 billion) in cash, marking Chairman Victor Li’s third major deal in the two months since he took over as head of the Hong Kong conglomerate.

Veon, the wireless carrier formerly known as VimpelCom, will sell its 50% stake in closely held Wind Tre SpA to CK, the companies said in statements on Tuesday. The deal, subject to European Union and Italian regulatory approvals, is expected to be completed in the third quarter or early in the fourth quarter, according to Veon.

Since taking over in May, Li has launched what could be the group’s biggest overseas acquisition and purchased UBS Group AG’s London headquarters, displaying a penchant for deal-making that his father was often famed for. The Italy deal would also allow CK to double down on one of its biggest profit generators at a time its U.K. businesses face uncertainties over Britain’s looming separation from the European Union.

Wind Tre’s 1.75 billion euros of bonds maturing in January 2025 rose as much as 16 cents on the euro to 97 cents, their biggest advance since they were issued last October, according to data compiled by Bloomberg. CK shares fell 1.6% to close at HK$81.90, the lowest in almost two years, in Hong Kong amid a broader rout in Asian stocks.

The acquisition should help provide a “significant increase” in CK’s earnings next year, Frank Sixt, group finance director, said in a phone interview. Italy generated the most profit among CK’s telecom businesses last year, contributing 1.1 billion euros to earnings before interest, taxes, depreciation and amortization.

CK Hutchison and Veon combined their Italian telecom businesses to form their venture in 2016 under the brands “3” and “Wind.” The deal values the Italian business at an enterprise value of about 6.7 times the carrier’s Ebitda in the past year, Sixt said. That’s similar to the average multiple fetched by members of the Bloomberg Intelligence Europe Telco Carriers index.

“Shareholders should be happy,” Sixt said. CK doesn’t expect any major obstacles in getting the necessary approvals, he said.

Veon, which expects to book net gains of about US$1.1. billion from the sale, said it will use proceeds to buy Global Telecom Holding S.A.E’s assets in Pakistan and Bangladesh, as well as paying down debt. Veon is offering to buy GTH’s operations such as Pakistan’s Jazz and Bangladesh’s Banglalink for US$2.55 billion in cash, deferred considerations and assumed debt.