Hutchison Whampoa has made a HK$4.23 billion ($544m) offer to take Hutchison Telecommunications International (HTIL) private.
The offer of HK$2.20 cash per share represents a 37% premium over the share price the day before HTIL suspended its shares. Hutchison Whampoa already holds just over 60% of HTIL. The company said it would not be increasing its offer.
The Li Ka-shing-controlled group said it was taking the international unit private to have more capital for growth. HTIL has been progressively shedding its units and last year spun off its Hong Kong and Macau activities into a separate company.
"The strategic transactions have also transformed the Hutchison Telecom Group's business portfolio and impacted its short- to medium-term financial prospects," HTIL said in a statement.
All of its current operations across four countries Thailand, Sri Lanka, Indonesia and Vietnam contribute negative cash flow.
The companies said HTIL’s high capital-expenditure requirements, lack of surplus cash for dividends, and short- and medium-term volatility made the firm "less suited to remain publicly-listed.
In a research note, Credit Suisse said the offer was attractive, given that said the two main businesses, in Indonesia and Vietnam, were cashflow negative and unlikely to “generate returns greater than cost of capital” given the low price points in both markets.
“It could be that HWL management have a much more optimistic view of the potential of these business to achieve cashflow breakeven than we do,” the note said.
“Alternatively, it could be that HWL is confident of finding a way to extract itself from these operations at a minimal equity loss, or possibly even a profit. It is fair to say that HTIL management’s execution ability on telecoms M&A has continually surpassed our expectations.”