Cheung Kong Infrastructure Holdings Ltd. offered $11.6 billion in stock to buy Power Assets Holdings Ltd. as Li Ka-shing seeks to combine his utility businesses for further expansion.
Cheung Kong Infrastructure will offer 1.04 shares for every Power Assets share not owned by Li’s companies, according to a Hong Kong exchange statement on Tuesday. Cheung Kong Infrastructure will also pay out a special interim dividend of HK$5 a share when the deal is approved, it said.
Hong Kong’s richest man is reshuffling his business empire for the second time this year as he looks for acquisitions and prepares to hand over to his elder son Victor. The deal will give Cheung Kong Infrastructure access to the HK$67.8 billion ($8.7 billion) cash hoard held by Power Assets and bring together holdings in 11 projects globally.
“Infrastructure is a highly capital-intensive industry where bigger is better,” Cheung Kong Infrastructure Chairman Victor Li told reporters. “After the merger we will be more diversified and not concentrated in just one country or industry.”
In the past two years, the two companies have bought assets including an Australian gas distributor, a Dutch waste processor, and an airport parking business in Canada. The combined company will own and operate utilities, waste management and transportation in China, Europe and Australia.
HSBC Holdings Plc is the adviser for Cheung Kong Infrastructure.
The dividend payout will take up about a third of the cash Power Assets has, Victor Li said.
“We are addressing the emotions of some small shareholders,” said Victor Li. “Logically we feel there is no reason not to invest the money in businesses when the company is highly profitable.”
Since January 2014, Cheung Kong Infrastructure has spent some HK$14 billion on acquisitions, while Power Assets has done about HK$5 billion of deals, Daiwa Capital Markets analyst Dennis Ip said in a February note.
“It would not be in the best interests of the Li family if the two companies remained separate entities such that CKI had to issue equity for new project acquisitions, while Power Assets suffered opportunity cost from the idle cash,” Daiwa’s Ip had written.
After the acquisition, the Li family’s CK Hutchison Holdings Ltd. will own 49.2 percent of the combined company. It now owns 75.7 percent of Cheung Kong Infrastructure, which holds 38.9 percent of Power Assets.
The elder Li reorganized his two main companies, Cheung Kong Holdings Ltd. and Hutchison Whampoa Ltd., in January this year. That created a company focused on property, with the other operating assets from ports to retail stores spanning more than 50 countries.
The Li family in June sold a 19.9 percent stakes in HK Electric Investment & HK Electric Investments Ltd. to Qatar Investment Authority, the Gulf state’s sovereign wealth fund, for HK$9.3 billion.