Investor Group To Buy 33% Stake In O2 UK-Three UK Merged Entity For GBP 3.1 Bln

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(RTTNews) - Hong Kong billionaire Li Ka-shing's Hutchison Whampoa Ltd. (HUWHY, HUWHF) announced Friday that it agreed to sell stakes totaling 33 percent in the entity that will be created by merging O2 U.K. and Three U.K. to a consortium of five leading institutional investors for a total consideration of 3.1 billion British pounds or $4.81 billion.

The group of five includes the Canada Pension Plan Investment Board or CPPIB, Singapore's sovereign wealth fund GIC Pte. Ltd., Limpart Holdings Ltd., a wholly owned subsidiary of the Abu Dhabi Investment Authority, Canadian long-term institutional investor Caisse de dépôt et placement du Québec, and Brazilian investment bank BTG Pactual.

Separately, CPPIB said it will acquire an about 12 percent stake in the merged entity by investing 1.1 billion pounds. GIC also confirmed it will invest 1.1 billion pounds.

"It is an honor to have such a strong collection of the world's largest and most sophisticated investors joining us as partners in building the combined business of Three and O2 UK, which will be the number 1 mobile operator in the UK with nearly 33 million customers," HWL Group Managing Director Canning Fok said.

However, the proposed investments are subject to the completion of the pending acquisition of Spanish telecom operator Telefonica S.A.'s (TEF, TDE.L) UK mobile business, Telefonica UK or O2 UK and its integration with Hutchison's Three UK business.

Hutchison said the investments will occur concurrently with completion of the Three UK acquisition. The investments will be used along with a committed 6 billion pound bridge facility entered into with HSBC Bank plc to fund the acquisition of O2 UK.

Hutchison Whampoa agreed on March 25 to acquire O2 UK, for about 10.25 billion pounds or $15.24 billion, including deferred upside interest sharing payments of up to 1 billion pounds. The deal is expected to close by the end of June 2016. The deal is subject to EU Competition approvals as it will create the no. 1 mobile operator in the UK with almost 33 million customers on a combined basis.

O2 UK is currently Britain's second-largest wireless provider, while Three UK is Britain's fourth-largest wireless carrier.

The combined entity will become the largest wireless carrier in the U.K. based on number of subscribers, topping the current market leader EE Ltd., which was acquired by UK's biggest fixed-line operator BT Group plc (BT_A.L, BT) in early February. EE was jointly owned by Germany's Deutsche Telekom AG (DTEGY) and French telecom giant Orange SA (ORAN).