A CVC Capital Partners Ltd. affiliate agreed to buy telecommunications assets from City Telecom (HK) Ltd. for HK$5 billion ($644 million). City Telecom rose in Hong Kong trading.
Metropolitan Light Co., owned by a partner of funds advised by CVC Asia Pacific Ltd., will buy City Telecom’s businesses including Hong Kong Broadband Network Ltd., the carrier said in a filing today. City Telecom plans to pay a special dividend of HK$2 billion, or HK$2.50 a share, when the sale is completed, while the remaining funds will be used to expand the company’s multimedia business, it said.
CVC, the private equity company that owns a controlling stake in the Formula One auto-racing series, will enter a telecommunications market where there is more than one fixed-line connection per household. City Telecom competes against carriers including billionaire Li Ka-shing’s Hutchison Telecommunications Hong Kong Holdings Ltd., and his son’s PCCW Ltd. in Hong Kong’s phone market.
To pay for the transaction, Metropolitan will receive HK$2.65 billion from funds advised by CVC Asia Pacific, and has access to HK$2.5 billion of debt funding from banks including JPMorgan Chase & Co. and Standard Chartered Plc, City Telecom said in its filing.
City Telecom rose 8.3 percent to HK$5.38, the highest intraday level since June 8, as of 11:29 a.m. in Hong Kong, valuing the company at HK$4.1 billion. The stock resumed trading today after being suspended pending the announcement.
The proposed sale requires the approval of City Telecom shareholders, the company said.
Hong Kong has a household fixed-line penetration rate of 102 percent, according to data from the Office of the Communications Authority, the industry regulator.
CVC Capital manages more than $44 billion of funds, and its portfolio includes 61 companies with more than 400,000 employees, according to City Telecom’s filing.
Separately, CVC and Royal Bank of Scotland Plc were seeking to raise as much as $220 million selling shares in Hong Kong-listed luggage maker Samsonite International SA, Wall Street Journal reported, citing a term sheet.
Samsonite shares fell 7.8 percent to HK$14.42 in Hong Kong trading, the largest intraday decline since Oct. 3.