HONG KONG (Reuters) - Cheung Kong Infrastructure Holdings Ltd (CKI) (1038.HK), part of billionaire Li Ka-shing’s business empire, offered on Tuesday to buy all the shares it does not already own in Hong Kong utility Power Assets Holdings Ltd (0006.HK) in an all-stock transaction valued at $11.6 billion.
CKI will issue 1.36 billion new shares to buy the 61 percent of Power Assets it does not own, the companies said in a joint securities filing. At Tuesday’s closing price of HK$66.15 per CKI share, the deal would be valued at HK$89.7 billion ($11.6 billion).
The deal will help CKI to take advantage of Power Assets’ cash pile, which stood at HK$67.8 billion at the end of June, to strengthen its balance sheet and help with future expansion, the company said.
It forms part of an overhaul begun in January aimed at tackling a valuation discount caused by the conglomerate structure in Li’s business empire. That restructuring created two listed companies, Cheung Kong Property Holdings (1113.HK) that focuses on property, and CK Hutchison Holdings with the telecoms, retail, aircraft leasing and ports assets of the group.
“We will continue to carry out deals in the future and then reinvest money into the company,” CKI Chairman Victor Li said at a news conference. “As an infrastructure company, the larger we get, the larger deals we can do.”
CKI has no plans to spin off any of its businesses for now, Li said.
As part of the deal, CKI will also pay a special dividend of HK$5 per share to all its shareholders, including new ones that previously held Power Assets stock. That would cost the company nearly $2.5 billion.
The merged company will have a presence in Britain, Australia and Canada, with assets including Northumbrian Water, UK Rails and Australian Gas Networks.
The transaction will dilute the stake held in CKI by Li’s CK Hutchison Holdings Ltd (0001.HK) to 49.2 percent from 75.7 percent before the deal.
Shares of Power Assets will be delisted from the Hong Kong stock exchange after the transaction is completed, which CKI expects to take place by early 2016, according to the filing.
HSBC (HSBA.L) was hired as financial adviser to CKI, while Anglo Chinese Corporate Finance Ltd was hired as independent financial adviser to CKI’s board.
Editing by Muralikumar Anantharaman and Jane Merriman