China Unicom gets funding and stake boost from parent in ‘mixed ownership reform’
China Unicom will sell 6.65 billion new shares at HK$13.24 each to its parent, at a 9.97 per cent premium to Tuesday’s closing price
Hong Kong-listed China Unicom, whose parent China United Network Communications Group last week announced to sell a 35.2 per cent stake to 14 big companies to raise 78 billion yuan (US$11.6 billion), says the parent will use most of the proceeds to buy more shares of the company.
Through its subsidiary Unicom BVI, Shanghai-listed China United has agreed to buy up to 6.65 billion new China Unicom shares, at HK$13.24 each, a 9.97 per cent premium to Tuesday’s closing price of HK$12.04, China Unicom said in a filing to Hong Kong’s bourse late on Tuesday.
Total proceeds will amount to around HK$88 billion, of which some HK$46.8 billion will be used to upgrade its 4G network, HK$23 billion will be for technology validation and trial runs of its 5G network, HK$2.73 billion for developing innovative business and HK$15.5 billion for bank loans repayment.
“[The subscription price] is more favourable than the price that the company is likely to obtain from independent third party investors,” the filing said of the benefit of the deal, adding the shares sale is a lower cost means of fundraising compared to debt issue or rights shares issue.
“The proposed subscription is part of the mixed ownership reform plan being implemented by Unicom Group,” China Unicom said.
Ultimate parent Unicom Group will own 79.93 per cent of China Unicom, the world’s sixth-largest mobile network operator by subscribers, after the shares sale, up from 74.36 per cent currently.
Last week, China United’s sale of a 35.2 per cent stake drew interest from 14 big companies, including Alibaba Group Holding, Tencent, Baidu, Suning and JD.com – five companies that have a combined market valuation of almost US$1 trillion between them.
Alibaba owns the South China Morning Post.
China United last week said the “mixed ownership reform” would “further optimise its corporate governance in accordance with the market-oriented principles ... and enhance its overall efficiency and competitiveness”.