Fixed-line deal shows Superman still divesting

Li Ka-shing continues to diversify his investments away from his Hong Kong home, the latest example being the sale by Hutchison of its fixed-line unit for $1.9 billion.

The sale by Li Ka-shing of his Hong Kong fixed-line business illustrates the continuous efforts by one of the city's most famous sons to diversify his assets away from the former British colony. 

Second only to Jack Ma in the current Asian rich list and third only, arguably, to Bruce Lee and Jackie Chan in the Hong Kong fame stakes, Li -- known locally as Superman -- increasingly appears to be flying the coop. 

On Sunday, a unit owned by Li's CK Hutchison Holdings said it agreed to sell Hutchison Global Communications, a fibre optic network and one of Hong Kong’s largest wifi service providers, to a US infrastructure private equity firm for HK$14.5 billion ($1.9 billion) in cash.

The deal, just as Li turned 89, followed news on Thursday that he planned to buy German metering and energy management group Ista for €4.5 billion ($5.25 billion), underlining just how Hong Kong's richest family is shifting its investment focus away from Greater China.

According to FinanceAsia’s analysis of Bloomberg data, overseas mergers and acquisitions agreed by Li-owned companies since 2016 total at least $17.5 billion. The biggest of the lot was completed just this May as a consortium led by Cheung Kong Infrastructure Holding snapped up Australian electricity firm Duet Group for A$7.4 billion ($5.6 billion).

"Superman" has also been trying to diversify away from real estate, the area in which he made his name. Last October he sold a Shanghai office and retail complex to a fund linked to China Life Insurance for Rmb20 billion ($2.9 billion).

Not alone

The well-known octogenarian is not the only Hong Kong tycoon divesting assets. As a generation of billionaires reach retirement age and plan for their succession, other prominent local families have been putting peripheral businesses up for sale too. 

For the most part it is strictly a business decision. “You can dispose of them, get some liquidity, and reinvest it back in a business with a higher [return-on-equity] and you can continue to generate wealth,” Chris Marquis, global head of private wealth solutions at HSBC Private Banking, said.

Last October, for example, Peter Woo’s Wharf Holdings sold its telecom business for $1.2 billion to a private equity consortium comprising both TPG Capital and MBK Partners. 

In the same month family-run Bank of East Asia, chaired by tycoon David Li, sold its share registry arm Tricor Holdings to private equity firm Permira for $835 million.

The desire of Hong Kong magnates to diversify has been aided in recent months by Chinese state-owned enterprises, who see the special administrative region as an alternative, nearby source of potential acquisitions at a time when Beijing has tightened scrutiny of cross-border transactions.

For example, China’s largest shipping conglomerate Cosco Shipping Holdings agreed in July to purchase a container shipping company from Hong Kong’s Tung family, one of the city’s most influential families with strong ties to the Chinese government.

Market sources have said that Victor Li, son of the elder Li and first in line to take over the Cheung Kong empire, has been pushing the expansion beyond Greater China and focusing on new business segments with higher growth. (Younger brother Richard runs PCCW, which has been selling down its stake in HKT Trust).

“Some of those divestments may be motivated by the search for better investment opportunities,” said Fan Cheuk Wan, head of investment strategy and advisory in Asia at HSBC Private Banking. “So the liquidation of certain businesses or non-core businesses will be able to help generate seed money for the next generation to start their new venture.”

Goldman Sachs and Deutsche Bank advised Hutchison on the deal, according to the statement. Credit Suisse is the sole financial advisor for the acquirer, New York-based I Squared Capital, according to a source familiar with the matter.

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