Li Ka-shing’s Hutchison Whampoa Buys Orange Austria in $1.7 Billion Deal

Hong Kong billionaire Li Ka-shing’s Hutchison Whampoa Ltd. (13) agreed to buy Orange Austria in a deal valued at 1.3 billion euros ($1.7 billion), adding to more than $31 billion of investments in overseas mobile-phone operations.

Hutchison 3G Austria, the local unit of Hutchison, expects to complete the purchase of Orange Austria in the middle of this year, the Hong Kong parent said in a statement today. Some Orange Austria assets, including mobile carrier Yesss!, will be sold to Telekom Austria Group for 390 million euros after the acquisition, Hutchison said.

Hutchison shares rose to the highest level in five months in Hong Kong trading on optimism the purchase may improve its ability to compete against market leaders Telekom Austria and Deutsche Telekom AG (DTE)’s T-Mobile Austria. Li, Hong Kong’s richest man, is stepping up acquisitions in Europe as companies in the region seek capital to counter the sovereign debt crisis.

“With the situation in Europe as it is, there will be opportunities to cherry-pick,” said Adrian Lowe, who rates Hutchison shares “buy” at Mirae Asset Securities in Hong Kong. The proposed acquisition of Orange Austria is “positive” for Hutchison’s mobile operations in Austria, he said.

Hutchison shares rose 3.7 percent to HK$76.65 at the midday break in Hong Kong trading, compared with a 0.1 percent decline in the city’s benchmark Hang Seng Index. The stock has gained 18 percent this year.

France Telecom

Orange Austria is 65 percent-owned by Mid Europa Partners, with the rest held by France Telecom SA. (FTE) Hutchison did not give a breakdown of debt and equity in 1.3 billion euros enterprise value for the Orange Austria deal.

J.P Morgan Chase & Co. advised Hutchison in the transaction. The sellers were advised by Morgan Stanley.

The acquisition will create a mobile carrier with 2.8 million customers and more than 20 percent market share in Austria, Hutchison said. Hutchison Austria expects to generate cost and capital spending synergies of at least 500 million euros from the combination, according to the statement.

Hutchison’s 3 Group, which owns phone businesses in Italy, the U.K., Denmark, Sweden, Austria, Australia and Ireland, has made cumulative investments of HK$240 billion ($31 billion), according to an estimate by Morgan Stanley in 2010. 3 Group made its first profit before interest and tax in 2010, after booking more than HK$157 billion of losses since starting operations in 2003.

Profit Surge

Cheung Kong Infrastructure Holdings Ltd. (1038), the roads and utilities arm of Hutchison, said in August it is leading a group of Li’s companies to buy Northumbrian Water Group Plc (NWG) for 2.4 billion pounds ($3.8 billion). In 2010, CKI completed the 5.8- billion-pound purchase of the U.K. power networks of Electricite de France SA.

Hutchison’s first-half profit increased seven-fold to HK$46.3 billion, helped by the $5.5 billion initial public offering of Hutchison Port Holdings Trust in Singapore in March.

Li is Hong Kong’s richest man with wealth of $22 billion, Forbes magazine said last month. Hutchison, with investments in ports, telecommunications, retail, property and energy in more than 50 countries, is Li’s biggest company by revenue.

The sale of the Orange Austria stake is France Telecom’s second major disposal in two months. The former French phone monopoly announced in December that it would sell its Orange Switzerland mobile-phone unit to buyout firm Apax Partners LLP for 1.6 billion euros.

Chief Executive Officer Stephane Richard is shedding slow- growing operations in Europe as the company turns to markets such as Africa and the Middle East that promise better growth. France Telecom is also looking to sell its Portuguese unit.

To contact the reporter on this story: Cornelius Rahn in Frankfurt at crahn2@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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