HKBN has revealed plans to merge with WTT Holding in an all-stock deal valuing its acquisition target at HK$10.5 billion ($1.34 billion).
Under the agreement [PDF], HKBN has agreed to purchase all WTT shares in exchange for issuing a combination of HKBN shares and vendor loan notes to WTT's joint 100% owners MBK Partners and TPG.
After the completion of the merger, which is expected in the first quarter of next year, MBK and TPG will own around 11.66% of HKBN.
Each company will nominate a director appointment to the HKBN board. The vendor loan notes issued to each company, each valued at HK$970 million, will also be convertible to HKBN shares under some conditions.
Announcing the deal, HKBN said a merger with Hong Kong's only enterprise-focused telecoms operator will enhance HKBN's service capabilities, diversify its business portfolio, and improve the quality of service offerings to enterprise customers through an increased footprint and capacity.
WTT and HKBN Enterprise Solutions are highly complementary due to WTT's focus on large corporates and HKBN's focus on SME clients, the company said.
The WTT network covers more than 5,400 buildings across Hong Kong and the company is currently serving over 56,000 enterprises in the market. WTT provides services ranging from data connectivity, IP-based voice telephony, and public cloud services to system integration solutions.
“Our integration track record of Y5Zone in 2013, New World Telecom in 2016 and I Consulting Group in 2018, shows that our co-ownership management alignment is very scalable,” HKBN COO NiQ Lai said.
“We look forward to welcoming our WTT colleagues to our elite sports team upon deal completion.”
HKBN has agreed to take on all WTT's existing debt and cash as part of the transaction.
The deal is subject to approval from HKBN shareholders and regulators. Both Canada Pension Plan Investment Board and GIC, which own a combined 27% of HKBN, have agreed to endorse the merger during a shareholder vote.