Orascom slashes stake in Hutchison Telecom
Wong Ka-chun and Tim LeeMaster
Orascom Telecom Holding, the second-largest shareholder in Hutchison Telecommunications International Ltd (HTIL), reduced its stake in the emerging markets operator through a private placement yesterday, the first time since a strategic deal worth HK$10 billion was signed in late 2005.
The Egyptian-listed Orascom hired Citi as sole bookrunner to help offer 143.43 million existing HTIL shares at between HK$10.70 and HK$10.95 each.
It will cash out HK$1.57 billion if the shares are sold at the top of the indicative price range, according to a sale document obtained by fund managers. The offering represents a discount of 3.1 to 5.3 per cent to the firm's close of HK$11.30 yesterday.
After the completion of the offering, Orascom's stake in HTIL will be reduced to 16.3 per cent from 19.3 per cent.
Orascom has agreed not to sell additional stakes in HTIL in the 90 days after the latest offering.
'The placement shocked me as it clearly identified a deteriorating relationship between Orascom and HTIL,' said a fund manager who owns HTIL shares. 'Though it seems reasonable for Orascom to exit as it opposed HTIL over the sale of entire stakes in Hutchison Essar early this year.'
Orascom sealed a deal with HTIL in December 2005, acquiring a 19.3 per cent stake at HK$11 per share for a total consideration of HK$10.1 billion.
The firm was also granted an option to buy a further 3.7 per cent interest in HTIL from Hutchison Whampoa within the next 12 months after the stake acquisition at not less than HK$11 per share.
Analysts said Orascom eyed HTIL two years ago principally because of its Indian mobile assets.
'After HTIL quit the Indian market, there were no more valuable assets that Orascom was interested in,' said an analyst at a hedge fund company.
Hutchison Essar, which accounted for 67 per cent of HTIL's turnover, was sold to Vodafone Group in March for HK$86.4 billion.
After the sale of the Indian business, Israel and Hong Kong became HTIL's major contributors. It also expects Vietnam and Indonesia to contribute solid profit growth in the medium term.
HTIL will use between HK$6.5 billion and HK$7.5 billion as capital spending this year, mostly on the networks building in the two countries.