CKI to buy Power Assets in $11.6bn deal

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.

News: Li Ka-shing's CKI to buy out Hong Kong utility in $11.6 billion deal

Google to become Alphabet following reorganisation

BY Richard Summerfield

Over the course of the last decade or so, Google has played a pivotal role in the lives of billions of people. Though the company began as a mere search engine, today Google has become a global conglomerate offering everything from video hosting to high speed fibre broadband, restaurant reviews to ‘smart’ home heating systems, and self driving cars to venture capital investments.

However, going forward this is all going to change, as Google will soon become a wholly owned subsidiary of a new holding company, Alphabet. “Our company is operating well today, but we think we can make it cleaner and more accountable. So we are creating a new company called Alphabet,” said Google chief executive Larry Page in a blog post on the company’s website.

In creating Alphabet, the company caught many analysts and investors off guard. But it is important to note that there will be no material change for consumers or investors going forward. Google’s fundamental businesses – and its experimental ‘Google X’ division – will remain the same under the Alphabet banner.

Indeed, Google's core units – search, YouTube, Android and maps – which account for almost all of the company’s annual revenue of around $66bn and its $460bn stock market capitalisation – will remain within the Google subsidiary. However, Google itself will have a new chief executive, Sundar Pichai, who had been senior vice president in charge of products. Mr Page and Google co-founder Sergey Brin will run Alphabet, Google’s new parent company. Other subsidiary  companies including Nest and Calico will sit alongside Google.

Though the move was unexpected, it has been heralded as a positive step. The reorganisation of the sprawling and diffuse Google business marks the first time that any of the major Silicon Valley powerhouses has attempted to streamline their units. Companies such as Amazon and Facebook, which themselves have acquired a litany of tech start ups in recent years, will surely watch Google's reorganisation with interest.

Investors have almost universally supported the realignment of Google's business. Shares of Google Class C stock rose more than 4 percent on Tuesday morning, the day after the announcement was made. The move is expected to bring greater balance-sheet accountability and reduce Google's spending on speculative endeavours. As Mr Page noted, “We plan to implement segment reporting for our Q4 results, where Google financials will be provided separately than those for the rest of Alphabet businesses as a whole.”

How the reorganisation will affect Google’s antitrust battles in Europe remains to be seen, however.

News: Google morphs into Alphabet; investors cheer clarity