PCCW seeks HK$8.53 billion from sale of share stapled units in HKT Trust and HKT Ltd

PCCW, the flagship company of tycoon Richard Li Tzar-kai, and subsidiary CAS Holding No 1 aim to sell HK$8.53 billion worth of share stapled units in HKT Trust and operating arm HKT Ltd, Hong Kong’s largest telecommunications service provider.

The transaction involves the disposal by Wednesday of 11.1 per cent of HKT’s share stapled units in issue that are held by CAS, according to separate regulatory filings on Monday by PCCW and telecommunications subsidiary HKT.

Shares of PCCW declined 5.97 per cent to HK$4.57 while HKT fell 7.4 per cent to HK$10.26 at the close of Monday’s trading.

Goldman Sachs, the placing agent, will sell 840.75 million HKT share stapled units at HK$10.15 each, representing an 8.4 per cent discount to HKT’s closing price of HK$11.08 on February 10.

Stapled securities generally refer to an arrangement under which different securities of an issuer are listed on the basis that these are legally bound together and cannot be transferred or traded separately. There is only a single price quotation on the Hong Kong stock exchange for stapled securities and no price quotation is given for individual components that form these securities.

Other locally listed companies that trade in share stapled units are Hongkong Electric and Jinmao (China) Investment Holdings.

According to PCCW, the proceeds from the sale will be used for general corporate purposes, including further investments in its media and information-technology service businesses and other new strategic investments, as well as repayment of debt.

This would mark the second high-profile divestment by PCCW this month, following its £300 million (HK$2.9 billion) sale last week of British investment holding company Transvision to Three UK, a subsidiary of Hong Kong conglomerate CK Hutchison Holdings.

Transvision’s only material asset is its holding of the entire issued share capital of UK Broadband, which has licensed spectrum to provide mobile broadband services in Britain.

CAS would have 51.97 per cent of HKT’s share stapled units after the sale, PCCW said.

Citi Research analyst Liu Bin said in a recent report that there was “upside potential” from PCCW’s media and IT solutions businesses.

“PCCW has been consistently executing on its business model and could leverage on group resources to drive profitable growth of non-HKT businesses,” Liu said.

Last month, PCCW group managing director Bangalore Gangaiah Srinivas said the company was looking to expand the regional presence of its media and IT service businesses.

Srinivas said the firm planned to expand its over-the-top Viu service in Thailand this quarter. The service is currently available in Hong Kong, Singapore, Malaysia and Indonesia.

Over-the-top applications deliver films, television shows and other video content over the internet, bypassing traditional commercial distribution through terrestrial broadcast, cable or satellite network operators.

Ramez Younan, the managing director at PCCW Solutions, said last week that the IT service provider would push forward with its expansion into eastern China this year.

The company intends to obtain another licence to operate a new data centre in China. It has such a licence in Guangdong province, where it is building a data centre in Shenzhen.

Srinivas said the PCCW group this year “will continue to identify suitable opportunities and monitor the external environment carefully to deliver value to shareholders ... We will invest prudently”.