ACQUISITION
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Cheung Kong

Cheung Kong to pay HK$7.6b for CK Hutchison’s aircraft leasing business

Developer plans to purchase CK Capital, which owns a fleet of 43 planes

PUBLISHED : Friday, 02 December, 2016, 8:53pm
UPDATED : Saturday, 03 December, 2016, 3:46pm

Cheung Kong Property Holdings, controlled by Asia’s second richest man Li Ka-shing, has agreed to pay HK$7.6 billion to buy an aircraft leasing unit from CK Hutchison, another firm owned by Li, as the property giant looks to expand into new business areas.

The developer plans to purchase CK Capital, which owns a fleet of 43 planes and the transaction is expected to be completed within two months.

The buyout was part of the efforts made by the real estate tycoon to scout for new business opportunities given the challenges it faced in identifying investments with reasonable returns on the current cyclical stage in the property market.

I think overall it makes sense for the company if the returns from property are no longer attractive...but the question is why is Hutchison selling the business
Alfred Lau, property analyst at Bocom international

“We are still searching for good property investment targets, but it will take time. The air leasing business is going to generate strong cash flows for us and it makes sense for us to invest in the company,” said Edmond Ip, director, Cheung Kong Property.

Company chairman Li said in August that the firm was finding it a challenge to identify property investments with reasonable returns after it reported a 51 per cent growth in interim core profit.

“The aircraft leasing business, which provides a steady income stream on a medium to long term basis, is an investment that matches the above-mentioned investment criteria,” a company statement said. “There is a structured secondary market which provides liquidity to the trading of the underlying aircraft.”

During the second half of the year, Cheung Kong Property has already purchased or agreed to purchase a total of 36 aircraft, which included 30 Airbus narrow body passenger aircraft and six Boeing narrow body passenger aircraft.

The latest moves marked the beginning of the company’s plan to “build the business into a meaningful size and is consistent with its current strategy to broaden its income growth prospects through diversification and globalisation,” the company said.

Ip said during a conference call on Friday that the valuation of the air leasing unit was “fair” and that the current management of the venture mainly comprised those from Cheung Kong Property.

CK Hutchison’s core businesses involve telecommunications, ports and retailing.

It makes more sense for Cheung Kong Property to purchase the aircraft leasing business, according to Ip.

“I think overall it makes sense for the company if the returns from property are no longer attractive...but the question is why is Hutchison selling the business,” said Alfred Lau, property analyst at Bocom international.

Cheung Kong has put a number of its property assets for sale over the last few months, including a Shanghai office and shopping complex for 20 billion yuan and 73-storey office high-rise The Centre in Hong Kong’s Central district for HK$35 billion.

Separately, CK Hutchison said Indian tax authorities issued a draft assessment order to its offshoot Hutchison Telecommunications International(HTIL) and the order proposes to impose a tax on HTIL on alleged gains of about HK$42.3 billion it incurred following the takeover of its Indian operations by Vodafone.

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