HONG KONG - Cheung Kong Infrastructure Holdings offered US$11.6 billion (S$17.6 billion) in stock to purchase Power Assets Holdings as Mr 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 Mr Li's companies, according to a Hong Kong stock exchange statement yesterday. Cheung Kong Infrastructure will also pay out a special interim dividend of HK$5 (92 Singapore cents) a share when the deal is approved, it said.
Hong Kong's richest man is reshuffling his sprawling business empire for the second time this year as he looks for acquisitions worldwide. The deal will give Cheung Kong Infrastructure access to the HK$67.8 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 is the adviser for Cheung Kong Infrastructure.
The dividend payout will take up about a third of the cash that Power Assets has, Mr Victor Li said. "We are addressing the emotions of some small shareholders," he added. "Logically, we feel there is no reason not to invest the money in businesses when the company is highly profitable."
Since January last year, Cheung Kong Infrastructure has spent some HK$14 billion on acquisitions, while Power Assets has done about HK$5 billion worth 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 Cheung Kong Infrastructure had to issue equity for new project acquisitions, while Power Assets suffered opportunity cost from the idle cash," Daiwa's Mr Ip had written.
After the acquisition, Mr Li Ka Shing's flagship CK Hutchison Holdings will own 49.2 per cent of the combined company. It now owns 75.7 per cent of Cheung Kong Infrastructure, which holds 38.9 per cent of Power Assets.
Mr Li reorganised his two main companies, Cheung Kong Holdings and Hutchison Whampoa, in January, as he prepared to hand over to his elder son Victor.
The reshuffle created a company focused on property, with the other operating assets from ports to retail stores spanning more than 50 countries. Mr Li in June sold a 19.9 per cent stake in HK Electric Investments & HK Electric Investments Ltd to Qatar Investment Authority, the Gulf state's sovereign wealth fund, for HK$9.3 billion.