Hutchison Whampoa gets stock exchange waiver...

...but is prevented from launching an IPO of its telecoms assets until the autumn.

Hong Kong conglomerate Hutchison Whampoa was finally granted a waiver by HKEx (HK Exchanges and Clearing) yesterday (Thursday), paving the way for a $2 billion IPO of its telecommunications assets.

Back in March, Hutch announced plans to spin off a variety of its telecommunications assets in a two stage listing process under the umbrella of Hutchison Telecom International Ltd (HTIL). It proposed listing the parent company in Hong Kong and New York, then spinning off the Indian cellular businesses through a separate domestic listing within a two-year timeframe.

Until about a week ago, the prospective offering looked as if it was going to run aground because of an HKEx rule, which prevents spin-offs within three years of a parent's listing. However, Hutch is said to have successfully convinced the exchange to grant a waiver on the basis that it does not intend to completely divest its Indian assets, but maintain majority ownership of them through HTIL.

Yet while the exchange has granted one waiver, it has refused another, which will prevent the company from launching its offering until September at the earliest. Under the exchange's six-month age of accounts rule, a company cannot market an offering with a set of accounts that are more than six months old.

Under its current filing and HKEx rules, Hutch and its lead manager Goldman Sachs have until June 30 to file the public offer document, otherwise a new set of accounts are required. But the lengthy delays it has incurred trying to get past the listing hearing committee means this deadline will be impossible to meet. The public offer document is only filed just before retail books are opened and Hutch has yet to begin pre-marketing, let alone commence formal roadshows, a process which normally takes a whole month.

The last time the exchange granted an extension was in 2002 when Chinese logistics company Sinotrans was preparing to list in Hong Kong. Lead managers Credit Suisse First Boston and BOCI were allowed to bring the company to market in January 2003 using 1H02 accounts, but were forced to launch the deal over Chinese New Year in order to meet the extension.

Since then, the exchange has refused to grant any extensions much to the annoyance of Asian ECM bankers, who have become increasingly vocal with their frustrations about a huge backlog in the approvals process. As one non Hutch banker puts it, "There's no flexibility to the IPO process any more. It takes time to get the accounts together and because HKEx is taking so long to clear deals, issuers are faced with marketing their offerings right up against the deadline, or missing it altogether."

Initially, many thought timing was a critical issue for Hutch because it needed to book an exceptional gain in its first half figures to cover losses from its European 3G operations. However, this has now become less of a pressing issue following the recent sale of its China JV with Proctor & Gamble for $1.75 billion.

Hutch has said it would like to raise up to $2 billion from the listing of HTIL, which will encompass a mixture of its 2G and 3G assets. The list co will comprise Hutch's mobile and fixed line assets in Hong Kong, plus its mobile assets in Ghana, India, Israel, Macau, Paraguay, Sri Lanka and Thailand.

Its fixed line assets have already been listed via Hutchison Global Communications, formerly Vanda in which it owns a 53% stake. Achieved via a backdoor listing earlier this year, the IPO promised much but delivered little, in the process attracting considerable criticism. Some believe it has severely dented the group's fabled reputation with Hong Kong retail investors.

Its Israeli assets are also listed in Tel Aviv through Partner Communications in which it owns a 43% stake.

Hutch is said to be hoping to achieve a fair value of about $6 billion for HTIL and a 2004 EV/EBITDA multiple around the10 times level. Analysts say the Indian assets are the "jewel in the crown," accounting for about 5.5 million of the 8.5 million users bought together in the new company. Separate reports suggest Hutch is pitching a fair value of about $3.5 billion for its Indian IPO.

Last week, it applied to India's Foreign Investment Promotion Board to consolidate its Indian cellular companies into a single vehicle under Hutchison Max. The five other units comprise: Hutchison Essar; Fascel; Hutchison Telecom East; Hutchison Essar South and Aircel Digilink.

Its listing aspirations in India have always been complicated by the fact that overseas operators are not technically allowed to own more than 49% of a domestic operator.

According to analysts reports, 2003 EBIT at HTIL's assorted assets amounted to: HK$340 million (Hong Kong cellular); HK$60 million (Hong Kong fixed line); break-even (Celltel Ghana); HK$10 million (Chung Kiu Thailand); HK$50 million (Sri Lanka) and minus HK$5 million (Paraguay).

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