Hutchison pockets $1.38 billion from stake in Israel's Partner Communications

Li Ka-shing's Hutchison Telecommunications has sold its stake in Israel's Partner Communications to local firm Scailex for $1.38 billion.

Hutchison Telecommunications International (HTIL) has sold its 51.3% controlling interest in Israeli telecommunications company Partner Communications to Scailex Corporation for $1.38 billion.

HTIL, which is part of the business group controlled by Hong Kong tycoon Li Ka-shing, owns its stake in Partner through a wholly owned subsidiary, Advent Investments, which is incorporated in Singapore.

The consideration is split between $1.08 billion in cash and $300 million of debt, which Advent will provide to Scailex. Terms on which Advent has extended the debt were not available but, clearly, the debt was needed to sweeten the deal for the buyer.

On a per share basis, the price translates to $17.50, which represents a discount of 1.7% to the closing share price of Partner on Tuesday and around 4% to its 30-day average share price. Li may have had to sweeten the sale but he has extracted a good deal for himself, reinforcing the reputation he has earned as an astute asset trader. Partner is not significantly off its 52-week high of $22.64.

Partner provides cellular and fixed-line telephony as well as internet services under the Orange brand in Israel. Earlier this week it declared second-quarter results, posting revenues of $386 million and Ebitda of $146 million. For calendar 2008 Partner earned a profit before tax of $378 million, up 13% year-on-year over 2007.

Partner shares gained 3.37% on Nasdaq to close at $17.70 on Wednesday.

The buyer Scailex Corporation is a distributor of telecom products in Israel. It imports, markets and provides maintenance for cell phones from Samsung Corporation as well as providing similar services for customers in the Cellcom network. Scailex is owned by an Israeli tycoon who has interests in other telecom ventures as well as real estate.

Scailex said in its Tel Aviv Stock Exchange filing that it expected to receive all regulatory approvals, including from Israel's Ministry of Communications, and anti-trust ruling within three months.

Scailex shares gained 8.6% on the TASE to close at $11.49 yesterday.

Hutchison Whampoa, HTIL's parent company, owns 60.4% of HTIL and so its disposal gain pre-tax amounts to around $575 million. HTIL said in its Hong Kong Stock Exchange filing that it had not decided how it would use the proceeds from the sale. However, HTIL chief executive officer Dennis Lui told media the company could consider paying shareholders a special dividend. Shareholders are likely to be expecting a special dividend after they earned HK$6.75 (87 cents) per share from the company's last substantial disposal, in 2007, when HTIL sold its 67% stake in Indian telecom player Hutchison Essar to Vodafone for $11.1 billion in cash.

HTIL is left with mobile telecoms operations in Indonesia, Vietnam, Sri Lanka and Thailand. Despite the expectation of a large dividend, HTIL shareholders seemed to question the asset sale strategy Li has adopted recently, sending the shares down 9% to HK$1.80 on the HKEx yesterday. Shareholders may also have been digesting the HK$245 million net loss HTIL declared for the first half of 2009, down from a HK$1.16 billion profit for the same period last year, on lower turnover and adverse movement of the Israeli currency against the Hong Kong dollar.

HWL shares fared better on the HKEx gaining 2.3% to HK$58.15 although the conglomerate's results for the first half of 2009 saw total Ebit decline 40% year-on-year to HK$18 billion. HWL's decision to maintain interim dividend at 51 HK cents may have contributed to the shares gaining.

Goldman Sachs continued its tradition of working with Li, advising HTIL and Advent.

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