Hutchison Whampoa to sell 33% of combined UK unit for up to £3.1B

Hutchison Whampoa plans to sell a 33 per cent stake in the combined business of O2 UK and Three UK to five institutional investors for a total of up to £3.1 billion (€4.2 billion/$4.7 billion) in order to raise additional funding for the acquisition of O2 from Telefónica.

Reports from Bloomberg and Reuters said the investors would pay £2.8 billion with an extra £330 million tied to O2 performance targets.

The investors are Canada Pension Plan Investment Board (CPPIB); GIC of Singapore, Limpart Holdings; a subsidiary of the Abu Dhabi Investment Authority (ADIA); CDPQ of Quebec, Canada; and BTG Pactual of Brazil. CPPIB and GIC confirmed they would each invest £1.1 billion.

The Hong Kong-based company said the investments by the five companies are conditional on, and will occur concurrently with, the completion of the acquisition of O2 UK from Telefónica and its combination with Three's business. Hutchison Whampoa has already secured a £6 billion bank facility to help fund the acquisition, which is subject to approval from the European Commission.

"The investors share our vision and belief in the value of creating a business with the necessary scale to enable us to compete effectively in the UK marketplace and to provide even better service and innovation using the largest and most resilient and advanced mobile network infrastructure in the country," said Canning Fok, group managing director of Hutchison Whampoa.

Spain-based Telefónica agreed in March to sell its O2 UK business to Hutchison Whampoa for £10.25 billion, comprising an initial payment of £9.25 billion and an additional £1 billion to be paid once the combined business achieves a pre-determined cash flow.

Hutchison Whampoa has already acquired O2 Ireland and Orange Austria and merged them with its respective units in those markets. The proposed UK deal is expected to present one of its biggest challenges to date.

Should the deal be approved, the merger of O2 with Three UK will reduce the number of mobile network operators in the UK from four to three and create a new mobile market leader with nearly 33 million customers.

Meanwhile the UK market could also see BT snap up EE in a move that would create a new converged fixed and mobile giant. That deal is subject to approval from the UK Competition and Markets Authority (CMA).

For more:
- see this Hutchison Whampoa release
- see this Bloomberg article
- see this Reuters article

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