February 23, 2024

DealBook: Hong Kong Tycoon to Pay $1 Billion for British Gas Firm

HONG KONG — A consortium of companies owned by Li Ka-shing, the richest person in Asia, agreed on Wednesday to buy MGN Gas Networks of Britain for £645 million ($1 billion), as Mr. Li’s corporate empire continued to broaden its already large global footprint in the energy sector.

Three Hong Kong-listed companies controlled by Mr. Li and his family — Cheung Kong Holdings, Cheung Kong Infrastructure and Power Assets Holdings — each have a 30 percent stake in the bidding consortium, while the charitable Li Ka-shing Foundation will hold the remaining 10 percent stake, according to a joint stock exchange announcement on Wednesday.

Mr. Li, 84, is ranked by Forbes as the world’s ninth-wealthiest person, with a net worth of $25.5 billion.

His companies, Cheung Kong Infrastructure and Power Assets, already have substantial investments in Britain’s natural gas, water and electricity sectors. That includes a combined 88.4 percent stake in Northern Gas Networks, a regulated distributor that supplies natural gas to around 6.7 million people and has almost 23,000 miles of pipeline stretching from the Scottish border to South Yorkshire.

The Li firms appear to be betting the complementary nature of MGN’s British gas business will enable them to engineer a turnaround at its unprofitable operations.

MGN Gas Networks, through its wholly owned Wales West Utilities, distributes natural gas throughout Wales and southwest England. Its network supplies 7.4 million customers, and it has 21,750 miles of pipeline.

The company reported a net pretax loss of £63.4 million in the fiscal year ended March 31, slightly worse than the £62.8 million net loss it booked in the previous fiscal year. It had net liabilities of £250.4 million at the end of March.

The Li firms are buying MGN from a group of shareholders that includes several infrastructure funds managed by Macquarie; the Toronto-based Canada Pension Plan; the trustee of a fund run by the portfolio manager Industry Funds Management; and the real estate and investment house AMP Capital. The deal will be settled in cash.

Completion of the MGN deal is subject to approval by the European Commission. The deal is also contingent on the Li companies being able to retain majority control of the equity and assets of Northern Gas in the event they are required by European regulators to sell part of their combined 88.4 percent stake in that firm.

Shares in Cheung Kong Infrastructure were suspended from trading on Wednesday, while shares in Cheung Kong Holdings closed down 0.9 percent and shares in Power Assets finished 1.6 percent lower after the deal was announced.

Article source: http://dealbook.nytimes.com/2012/07/25/hong-kong-tycoon-to-pay-1-billion-for-british-gas-firm/?partner=rss&emc=rss

DealBook: In India, Vodafone to Buy Out a Partner

7:59 p.m. | Updated

Vodafone, the British mobile phone giant, said Thursday that it would pay $5 billion in cash for the Essar Group’s one-third stake of an Indian joint venture.

The deal will increase Vodafone’s exposure to one of its most important and fastest-growing markets.

“We’re adding about three million customers a month,” said Ben Padovan, a Vodafone spokesman. “India has a population of 1.2 billion, and penetration is about 60 percent, so there’s a lot of market share to go for.”

The move resolves many months of conflict between the companies, as Essar, a conglomerate with interests in steel, power and shipping, sought to determine the value of its interest and explored the possibility of an initial public offering for its shares.

This year, the two partners argued over Essar’s plans to reverse-list its stake in the venture by merging some of its shares into India Securities, already a public company — a deal that Vodafone said would have inflated the value of its stake.

Vodafone currently has a direct equity interest in 42 percent of the company, and the Essar deal will give it 75 percent, Mr. Padovan said.

The rest is in the hands of entities controlled by Indian partners. Indian regulations prohibit foreign investors from owning more than 74 percent of domestic telecommunications companies, and Vodafone plans to divest itself of about 1.3 percent of its stake to comply with the law.

Vodafone has also been embroiled in a lengthy tax dispute regarding its initial stake in the joint venture, which it bought in 2007 from Hutchison Telecommunications International, a company controlled by the Hong Kong billionaire Li Ka-shing.

The case is to come before the Supreme Court of India in July, and could leave the company liable for up to $2.5 billion in capital gains, in a deal where, paradoxically, it was the buyer.

Last year in May, Vodafone took a $3.5 billion write-down on the value of its Indian business, which has been battered by fierce competition from rivals like Bharti Airtel and Reliance Communications.

The Indian mobile telecommunications market is the second-largest in the world, after China’s, and one of the fastest growing. But the sector is crowded, with more than a dozen companies vying for customers and driving down prices.

Most countries have between three and four major telecommunications operators, and if Indian law were changed to let rival telecoms to conduct takeovers, the sector might see a wave of consolidation.

Article source: http://feeds.nytimes.com/click.phdo?i=991ef1978281d2626636690a1fd4f1cf