Mergers & Acquisitions

Hopewell sells highway unit for US$1.25b to Shenzhen government-backed firm

Upon the deal’s completion and under takeover rules, Shenzhen Investment will be required to make a mandatory general offer

PUBLISHED : Friday, 29 December, 2017, 7:23pm
UPDATED : Friday, 29 December, 2017, 8:59pm

Hopewell Holdings said it would sell 66.69 per cent of its highway business to Shenzhen Investment International Capital Holdings Infrastructure for HK$9.87 billion (US$1.25 billion), or HK$4.80 a share, in an all-cash deal.

The sale of Hopewell Highway Infrastructure will be made through the company’s indirectly wholly-owned subsidiary, Anber Investment.

Upon the deal’s completion and under Rule 26 of the Takeover Code, Shenzhen Investment will be required to make a mandatory general offer for all Hopewell Highway shares it does not already owned.

“The acquisition … offers an attractive investment opportunity for Shenzhen Investment Holding in the important infrastructure sector …,” Hopewell Holdings and Shenzhen Investment said in a joint filing to the Hong Kong stock exchange on Friday.

As Shenzhen is one of the core cities leading the development of the Guangdong-Hong Kong-Macau “Greater Bay Area”, the deal represents a valuable addition to Shenzhen Investment’s portfolio and a significant contributor to its “continuous expansion of the connections” in the area, the filing said.

Hopewell Highway focuses on the initiation, development, promotion and operation of toll motorways and bridges in China. It has a net asset value of about 5.56 billion yuan (HK$854.32 million) as of the end of June 2017.

For the years ended June 2016 and 2017, it posted net profits of 520.5 million yuan and 631.6 million yuan, respectively. Hopewell Highway’s Hong Kong-traded shares closed flat at HK$4.98 on Friday, while Hopewell Holdings closed down 0.7 per cent at HK$28.85.

According to the stock exchange announcement, upon completion of the deal Hopewell Holdings expects to realise a net gain of about HK$4.92 billion. Shenzhen Investment intends to maintain the main board listing status of Hopewell Highway.

Gordon Wu, the chairman of Hopewell Holdings, said negotiations with Shenzhen Investment started in November and a deal was quickly struck. Shenzhen Investment is the investment holding company of the Shenzhen municipal government, and is ultimately controlled by the State-owned Assets Supervision and Administration Commission, which regulates all state-owned enterprises.

Wu said the speed with which the deal was completed underlines his and the company’s support for the local government of Guangdong to lead the development of the transport network in the Greater Bay Area.

Hopewell Highway currently operates two motorways in Guangdong province – the Guangzhou-Shenzhen Superhighway and Western Delta Route.

“The Guangdong provincial government has its own blueprint on how the traffic network should be organised for the Greater Bay Area. We always like to support the local government’s effort,” said Wu.

Thomas Jefferson Wu, the managing director of Hopewell Holdings, said the group was confident of the potential of the Greater Bay Area. He added that the company will use the proceeds from the sale to find other investment opportunities in the area, but gave no further details.

Hopewell Holdings will hold an extraordinary general meeting on or before January 22 to get shareholders’ approval.

The Greater Bay Area refers to the Chinese government’s plan to link the cities of Hong Kong, Macau, Guangzhou, Shenzhen, Zhuhai, Foshan, Zhongshan, Dongguan, Huizhou, Jiangmen and Zhaoqing into an integrated economic and business hub.