Li Ka-shing sold it again!

China Funds ·  Jul 16, 2022 14:17

China Fund News reporter Ivan

The Li Ka-shing family has made another big move overseas!

Changjiang Hutchison (CK Hutchison), Cheung Kong Industrial Group (Changshi) and CK Infrastructure, members of the CK Hutchison family of the Li Ka-shing family, jointly announced on the evening of July 14 that US private equity giant KKR will take a 25 per cent stake in the British water company Northumbrian Water held by the Li family for a basic consideration of 867 million pounds (about HK $8.073 billion).

For this transaction, CK Asset expects a gain of about HK $500m, CK Infrastructure is expected to earn about HK $900m, and CK Hutchison expects a gain of about HK $1 billion. That means the Li Ka-shing family will make a combined profit of HK $2.4 billion from the deal.


(source: joint announcement of CK Hutchison, Changshi and Changjian)

The announcement revealed that the deal is still subject to approval by the UK Financial Conduct Authority, the Isle of Man Financial Services Authority and antitrust regulators, and is expected to be completed by the end of August. Upon completion, CK Asset, CK Infrastructure, CK Hutchison and KKR will hold 15 per cent, 30 per cent, 30 per cent and 25 per cent of the project respectively.


(source: Northumbrian Water website)

Northumbrian Water, a British water company, was wholly acquired by the Li Ka Shing family in 2011. Its core business is to supply water in England and Wales and provide sewage treatment services (including water supply and collection, treatment and disposal of sewage and sewage sludge), as well as sewage treatment services in Scotland.

HSBC Securities believes that the transaction is priced at 1.5 times the value of the assets of the regulated project, or 50% premium, and is also equivalent to about 9 times earnings before interest, tax, depreciation and amortisation (EBITDA). It is believed that the transaction can provide synergy and strengthen the partnership with KKR.

Li Ka-shing family has a deep relationship with KKR.

The KKR of this transaction is also a big name, and has intersected with the Li family several times.

According to the company's website, KKR, founded in 1976, is one of the world's oldest and most experienced asset management and private equity institutions, including direct investment, mergers and acquisitions and so on. KKR has been very active in Asia and has so far set up five funds in Asia with a capital size of more than US $30 billion.

It is worth noting that at the beginning of this month, a consortium led by KKR spent 15 billion pounds trying to buy Li Jia's British Power Company (UK Power Networks) at the last minute when Li Ka-shing's eldest son Victor Li rejected the proposal and raised the price on the grounds of inflation. But the "halberd" at the beginning of the month did not let KKR give up, and finally agreed to buy a stake in the British water company with the Li family, for 867 million pounds in exchange for a 25% stake.

For this cooperation, Tara Davies, partner and head of core infrastructure business at KKR, said that KKR is pleased to re-establish a long-term partnership with CJC, which has rich experience and track record as a global infrastructure asset holder and operator, while KKR and CJC have been looking for ways to further strengthen institutional collaboration.

In fact, the Li Ka-shing family and KKR have been working together since last year.

In August 2021, a consortium led by KKR acquired Australia's Spark Infrastructure Group (Spark Infrastructure Group) for A $5.2 billion (US $3.7 billion) and became a partner of the Li Ka-shing family's Australian business SA Power Network and Victoria Power Network projects.

Gan Qinglin, managing director of Changjian Group, said that KKR is an experienced infrastructure investor and a good partner of the company's power grid business in Australia. It is expected that this transaction will promote the business relationship between the two sides, and is expected to achieve good synergy in terms of business expertise, capital strength and global network. More cooperation will be sought in the future.

In addition, it is worth mentioning that China is one of the Asian countries with heavy positions and key layout of KKR. In May this year, Kaide Private Equity Management (Hainan) Co., Ltd. completed the filing in Hainan, with a registered capital of 5 million yuan, funded by KKR Asia Co., Ltd., which is also the first private equity fund management company filed by KKR in China.

The British territory of the Li Ka-shing family

Britain can be said to be the core town of the Li Ka-shing family overseas, and the Li Ka-shing family was jokingly called "bought half of Britain".

According to BBC, CK Asset, owned by Li Ka-shing, is the largest single overseas investor in British history, with a total investment of more than 255.5 billion yuan. The investment projects involve water, telecommunications, railway vehicle leasing, port, airport, real estate, financial market business and other areas, which can be said to involve all aspects of British people's life.


(a list of parts of CKI's UK business source: company website)

Some media have even pointed out that, according to incomplete statistics, the Li Ka-shing family currently controls about 1% of Britain's electricity distribution market, nearly 30% of the natural gas supply market, nearly 7% of the water supply market, more than 40% of the telecommunications market, nearly 1/3 of the British wharf, and more than 500000 square meters of land resources.

CK Asset once said: "because of its scarcity, Britain's energy infrastructure assets not only have stable performance and guaranteed returns, but also have extremely low risks. Some industries even have national endorsements that can continuously generate safe and lasting stable income. It is in the interests of the Li family. "

But the Li Ka-shing family seems to be "evacuating" the UK in recent years.

At the end of 2021, the Li Ka-shing family plans to sell the London headquarters of UBS owned by CK Asset for about 1.25 billion pounds (10.5 billion yuan). It is accepted by South Korea's largest investment company, the Korea National annuity Corporation. The building was acquired by CK Asset in June 2018 at a cost of 1 billion pounds and has been held for nearly four years.

In early 2022, the Li Ka-shing family was rumored to be in talks to sell UK Power Networks, a British power company, valued at as much as 15 billion pounds (126.3 billion yuan). At present, the asset is still in the market to accept offers from bidders.
Outsiders say the move may involve a reallocation of Li Ka-shing's family assets, but it is still unclear. As of today, according to the latest statistics on the Forbes Rich list, retired Li Ka-shing is still the 29th richest man in Hong Kong and the world's richest man with assets of US $35.3 billion.


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