But that didnÆt stop EgyptÆs Orascom Telecom Holdings which yesterday sold another 2% stake in Hutchison Telecommunications International Ltd (HTIL) through a fixed-price block trade, only two-and-a-half weeks after its previous sale. However, the HK$1.01 billion ($130 million) transaction wasnÆt really that risky as the deal was essentially done as a private placement with the shares sold to only about 10 investors. Several of the buyers were also the same names who took part in the first sell-down.
Citi was the sole bookrunner for both deals and can be expected to have sounded out investors thoroughly before this second deal, but the key to it all was that both sell-downs were done at the same price. This reduced the risk of upsetting the buyers of the first transaction û especially those who didnÆt participate again last night. The sale required Citi to waive the lock-up imposed after the previous sale, which suggests it would have wanted to be very confident of a successful outcome before going ahead.
As HTILÆs share price has edged slightly higher since the last sell-down, the discount versus yesterdayÆs close ended up a touch wider at 6%. Last time, the price was fixed at a 5.3% discount after being marketed in a range between 3.1% and 5.3%.
YesterdayÆs sale comprised 94.19 million shares that were offered at a fixed price of HK$10.70, compared with the closing price of HK$11.38. The deal will see Orascom reduce its stake in the Hong Kong-listed mobile and fixed-line operator to 14.2%.
Sources say it is unlikely that Orascom will sell any more shares as a reduction below 13% would cause it to lose its two seats on the HTIL board.
Orascom has been a strategic shareholder in HTIL since it bought a 19.3% stake in December 2005. The two firms said at the time they would seek to cooperate within a number of areas, including the procurement of network equipment, software and information technology as well as on international roaming and transmission costs.
Both companies provide mobile telecom services with a specific focus on emerging markets with large populations and low mobile penetration rates. HTIL also operates a fixed-line network in Hong Kong and was the first operator to launch 3G mobile services in Hong Kong and Israel.
Under an agreement with HTILÆs majority shareholder Hutchison Whampoa, which sold the shares to Orascom in the first place, neither Orascom nor Hutchison were allowed to sell any shares in HTIL for two years after the original transaction. That lock-up is set to expire on December 21, but Hutchison last month gave its consent for it to be waived a bit earlier.
However, the original agreement also stipulates that Orascom would be allowed to sell 5% of HTILÆs shares at a first stage, and the fact that the company sold only 3% last time not surprisingly caused speculation about whether or not it would return to sell more. The fact that this sale is now completed means it wonÆt act as a drag on HTILÆs share price.
One source noted that Orascom would have wanted to sell the entire 5% in one go but, at the time of the first sell-down, wasnÆt sure whether the market would be able to absorb it at the desired price.
HTILÆs share price fell 5.7% the day after the previous sell-down on October 25 to HK$10.66, but the very next day returned above the placement price and has continued to edge higher since then û albeit with some down days in response to sharp sell-offs in the broader market. It reached its highest close of HK$11.96 on Wednesday last week and yesterday dropped 1.4% to HK$11.38.
The selling price of HK$10.70 is slightly below the HK$11 per share that Orascom paid back in December 2005, but the investment has nevertheless yielded a handsome return as HTIL paid a special dividend of HK$6.75 per share following the sale of its 67% stake in the Hutchison Essar joint venture in India to Vodafone for $11.1 billion plus $2 billion of debt earlier this year.
OrascomÆs portion of the dividend amounted to $793 million. And based on HTILÆs share price of HK$10.08 after the dividend distribution on June 29, Orascom said the net return on its original investments stood at 33.5% at that time. Since then, the share price has gained another 12.9%.
HTIL has had a pretty strong year with all its different businesses reporting improved results in the first six months due to a 15% year-on-year increase in its global customer base to 6.8 million, higher usage and also higher revenues from mobile data services. Excluding the contribution from the India operation, turnover from continuing operations increased 12.3% to HK$9.6 billion during this period compared with a year earlier. The company also reported a profit before tax from continuing operations of HK$663 million, compared with a loss of HK$300 million in the first half of 2006.
The share price has come off from a record high of HK$20.85 in January this year, although most of that is the result of an adjustment to reflect the sale of the Indian assets.
Aside from Hong Kong, HTIL currently has operations in Macau, Israel, Thailand, Sri Lanka, Ghana, Vietnam and Indonesia. Orascom operates GSM (global system for mobile communications) networks in Algeria, Pakistan, Egypt, Tunisia, Iraq, Bangladesh and Zimbabwe.
This was the first placement by a Hong Kong-listed company since RexCapital Financial Holdings raised $127 million from a top-up placement last Wednesday. Since then the markets have become increasingly volatile and jittery, making most issuers hesitant to try and raise fresh cash. For shareholders wishing to sell existing shares, a more volatile market typically means having to offer the shares at a deeper discount.
RexCapital, which provides equipment and services for ChinaÆs lottery and gaming industry, sold 10% of its existing share capital at HK$1.52 per share, which represented a 5% discount to the latest close. The shares had been offered in a discount range of 3.1% to 6.2%. CLSA arranged the offering, which attracted about 40 investors and was more than three times covered.
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