Hutchison Said to Face Objections for O2 Valuation From BackersAmy Thomson, Manuel Baigorri and Dinesh Nair
Hutchison Whampoa Ltd., which is in talks to buy Telefonica SA’s O2 business, faces objections from potential funding partners over the valuation it is placing on the U.K. phone carrier, people familiar with the matter said.
Hutchison is offering investors 30 percent of the business, a stake it values at as much as 3 billion pounds ($4.5 billion), the people said, asking not to be named because the matter is private. Hutchison is in talks with investors including Singapore’s GIC Pte and Canada Pension Plan Investment Board, and has also held discussions with potential partners including Qatar’s sovereign wealth fund, the people said.
If co-investors decline Hutchison’s offer, the Hong Kong-based company could end up holding a larger stake in the British entity as it doesn’t need additional backers to finance the deal, the people said. The acquisition could be announced as soon as this week, though Hutchison may not name any co-investors at the time, one of the people said.
The merger is set to create the biggest U.K. mobile operator with more than 30 million customers when Hutchison joins its local Three mobile business with O2.
Li Ka-shing, the octogenarian billionaire who owns Hutchison, is in Singapore this week to seal the deal with GIC, the city-state’s sovereign wealth fund, and to mourn the death of former Prime Minister Lee Kuan Yew, who died at 91 this week, one of the people said.
Representatives for Hutchison, O2, and the Qatari and Canadian funds declined to comment. A representative for GIC didn’t return a call and e-mail seeking comment.
Hutchison said Tuesday that it’s still in exclusive talks to buy O2. Hutchison announced the negotiations for the $15 billion acquisition in January after Telefonica failed to sell O2 to BT Group Plc.
The move marks a departure from the strategies of local competitors who, instead of focusing on growing larger mobile bases, are branching out into TV and broadband service. The deal, which must be approved by regulators, may be completed in 2016, the companies have said.
In February, former U.K. phone monopoly BT and EE Ltd. agreed to a 12.5 billion-pound merger. Pay-TV provider Sky Plc struck a deal with O2 to resell its mobile service and offer bundled TV-mobile-broadband packages, while people familiar with the matter have said Vodafone Group Plc is considering options including a combination with Liberty Global Plc.
The talks come at a time when Hutchison’s 86-year-old chairman, Asia’s second-richest man, is overhauling a business empire spanning across industries ranging from phones to infrastructure and retail. Li is in the process of merging his two biggest companies into a conglomerate called CK Hutchison Holdings Ltd. and spinning off their real-estate assets into a separate company.
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