BY Richard Summerfield
Cheung Kong Infrastructure Holdings Ltd has announced plans to merge with its power utility affiliate Power Assets Holdings Ltd in an all shares deal worth $11.6bn, creating in the process an infrastructure giant.
The deal will see the infrastructure division of Hong Kong businessman Li Ka-shing, which already owns 38.9 percent of Power Assets; acquire the remaining outstanding share in the company. Following completion of the deal, all shareholders of the newly merged company will receive a special dividend of around $0.65.
In completing the deal, CKI will gain access to Power Assets' considerable cash pile, which CKI will utilise both to shore up its balance sheet and to pursue further expansion. At the end of June, Power Assets had around $7.47bn of net cash available, far outstripping the net cash available to CKI. 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 announcing the deal. "As an infrastructure company, the larger we get, the larger deals we can do."
Once the deal has been completed, the newly merged company will control a number of businesses across a variety of sectors, including energy infrastructure, transportation infrastructure, water infrastructure, waste management and other infrastructure related businesses.
CKI has undergone a period of significant renewal in 2015. In January it restructured itself, creating two listed companies. Cheung Kong Property Holdings focuses on property, while CK Hutchison Holdings focuses on telecoms, retail, aircraft leasing and port assets.
In order to finance the deal, CKI will issue 1.36 billion new shares, according to a joint securities filing announcing the acquisition. Under the terms of the deal, Power Assets will delist from the Hong Kong stock exchange once the transaction has been completed. The two companies expect the deal to close in the first quarter of 2016.
The companies already have a solid history of collaboration; CKI and Power Assets have been involved in 11 infrastructure projects together in recent years. These projects included several high profile projects in Europe and the UK.