Hutchison Whampoa's share price tumbled yesterday as it launched a bid to keep the valuation of its Italian mobile operator 3 Italia at Euro9 billion ($83 billion). Hutchison's share price fell 2.56 per cent to $73.95 after the company shelved the initial public offering of 3 Italia when it failed to fetch the target valuation. However, a market source said the conglomerate was set to farm out a 10 per cent stake in 3 Italia at Euro420 million to a group of investors in a private placement. The source said Goldman Sachs, which is arranging and underwriting the placement, had pinpointed several potential investors. He said the 10 per cent stake for private investors would be outside the scope of the 25 per cent minimum stake necessary for the future spin-off of 3 Italia, which is likely to be relaunched in 12 to 18 months. This means that 35 per cent of 3 Italia would be in public hands if its third listing attempt is successful. The placement price of Euro420 million values 3 Italia at Euro9 billion, based on an estimated debt of Euro4.8 billion at the end of this year, according to Hutchison. 'As far as I know, Hutchison is very likely to go ahead with it, even with a valuation ranging from Euro8 billion to Euro8.5 billion. However, the poor market response can hardly support such a high value,' said one banking source. Hutchison managing director Canning Fok Kin-ning said after the collapse of the listing that the Euro9 billion valuation was realistic. 'This is a deal in which we can give shareholders a benchmark with which to view our business,' he said. An analyst from a US brokerage house said the put option attached to the placement transaction would make it virtually risk-free for investors, since the shares could be sold back to Hutchison at the original price plus a premium with reference to three-month Euribor interest rates plus 90 basis points if a public offering was not launched within three years. 'In that regard, the placements seem to be a convertible bond with an announced value, rather than a value determined by the market. Besides, Hutchison only need to pay a premium on its borrowing cost at 30 basis points which means it gives Goldman a favourable deal,' the analyst said. Investors said that Hutchison would need to be more specific about who planned to invest in 3 Italia if they expected the market to accept its valuation of Euro9 billion. 'If the company can leak more information about who is buying the stake, it would be more convincing as a benchmark,' said Pauline Dan, executive director in equities at Manulife Asset Management (Hong Kong). Although the delay of the spin-off of 3 Italia leaves an earnings gap, analysts said it would not be difficult for Hutchison to fill it. 'It may offload some stakes, say 5 to 10 per cent stakes, in Cheung Kong Infrastructure and Husky Energy to accommodate the earnings gap,' said an analyst from a French investment firm. Standard & Poor's Ratings Services has reaffirmed its A-minus long-term corporate credit rating on Hutchison.