Hutchison may earn $18b in 3G Milan listing
Hutchison Whampoa's 3G unit in Italy yesterday applied to the country's securities regulator for a listing on the Milan exchange in a move that could produce an exceptional gain of up to Euro1.99 billion ($18.76 billion), analysts said.
Net proceeds from the share offering would go solely to Hutchison 3G Italia, the bulk of which would be used to retire the unit's debt, the conglomerate announced yesterday.
Hutchison did not provide any details of the imminent initial public offering.
However, a source told the South China Morning Post that 3G Italia planned to sell 25 per cent of its share capital to investors, raising Euro2.5 billion from the float, and to list by November.
That would value the unit's equity at Euro10 billion, and adding the outstanding debt would produce an enterprise value of between Euro12 billion and Euro15 billion, the source said.
Hutchison said the planned share sale of its biggest 3G market operator in terms of subscribers was being advised by a group of five international banks consisting of Goldman Sachs, HSBC, JP Morgan, Merrill Lynch and Morgan Stanley.
Italian banks Banca IMI and Banca Caboto had also been conditionally designated as joint global co-ordinators, Hutchison said.
'Such an IPO ... will be highly beneficial to Hutchison as it will set a clear and positive market benchmark for measuring the value of all our group's 3G businesses,' group managing director Canning Fok Kin-ning said.
The management has said that Hutchison 3G UK, the second-largest of the group's nine 3G operations, will be the next to list after the Italian unit.
Hutchison will need shareholders' approval of the deal as the spin-off would dilute the parent's interests in the business. An independent financial adviser would be appointed before the vote.
Meanwhile, the company said that qualified Hutchison shareholders might also get shares of the unit that would be listed soon.
Hutchison paid about Euro3.15 billion for the Italian 3G spectrum in October 2000. It owns 91 per cent of the unit, with local investors holding the remaining 9 per cent.
According to the group's annual report last year, its 3G group businesses had liabilities of $162.55 billion. An analyst estimated some 80 per cent, or $130 billion, of that amount was owed by its Italian and British 3G units.
With 4.52 million registered 3G subscribers in Italy, of which almost 90 per cent were prepaid users, Mr Fok said the unit had already achieved positive ebitda (earnings before interest, tax, depreciation and amortisation) after subscriber acquisition costs last month.
An analyst estimated Hutchison 3G Italia's cumulative net losses at Euro1.47 billion since 2003, when the service was launched.
He said Hutchison could achieve a one-off gain of up to Euro1.99 billion from the initial offering as a result of repricing its 3G assets against their latest market value.
Another analyst, who earlier valued the unit at Euro6.3 billion, said every Euro1 billion increase over his valuation would add $2.50 to Hutchison's net asset value per share.
