HKBN to merge with WTT

Hong Kong broadband operator HKBN said it has agreed to buy fixed-line operator WTT HK in a deal that valued the business at HK10.5bn (US$1.34bn) including debt. WTT is currently owned by TPG Capital and MBK Partners, which acquired the telco from Wharf Holdings in 2016 for HK$9.5bn (US$1.22bn).

As part of the deal, HKBN will issue the private equity firms a combination of its shares and vendor loan notes for WTT shares worth roughly HK$5.5 billion (US$701m). It will also assume WTT’s existing debt, adding up to around HK$5 billion (US$637m) by end of June.

After the deal closes, MBK Partners and TPG will each own a 11.66% stake in HKBN, in addition to a non-voting, coupon-less vendor loan note valued at HK$970.5m (US$124m). The two private equity firms will reportedly end up owning close to 15% of WTT each once the vendor loan notes are converted. MBK Partners and TPG will each nominate a director for appointment to the board of HKBN at closing.

The transaction is subject to the approval of HKBN shareholders and regulatory approval and is expected to close in the first quarter of 2019.

Goldman Sachs acted as the financial advisor to MBK and TPG, while JP Morgan advised HKBN. Latham & Watkins provided legal counsel to HKBN, while Clifford Chance acted as the legal advisor to MBK Partners and TPG for the transaction.

TMT Finance has exclusively reported in July that WTT also held merger discussions with HGC, another fixed line operator in the market, to compete against their aggressive competitor in the market, HKBN. However, the discussions didn’t result in a deal, potentially due to disagreements on the shareholding structure of the future merged entity. According to sources, HKBN was tipped to be ambitious and was looking for an acquisition of either HGC or WTT.

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Published on 15.08.2018
Published on 15.08.2018
Published on 15.08.2018