DECEMBER 27, 2006
Newsmakers
By Frederik Balfour
Is Li Ka-shing Making his Move in India?
The Hong Kong billionaire is known for his canny business deals. Now he may reap billions by selling out of Hutchison Essar, his cellular joint venture in India
Hong Kong billionaire Li Ka-shing is renowned in Asia for his shrewd deals. Now, the latest proof of his acumen may be on hand in India, far from Li's Hong Kong base
For weeks, rumors have been circulating about the takeover of all or part of Indian mobile carrier Hutchison Essar, a joint venture between Indian conglomerate Essar and Hutchison Telecom International (HTX), one of Li's main companies. So far only Vodafone has publicly identified itself as a potential bidder. Other possible suitors include Malaysian cell phone operator Maxis together with Texas Pacific Group, a consortium including Hutchison Essar rival Reliance Communications; and Essar Group itself, bidding to buy the 67% stake it doesn't own in the company from Hong Kong-based Hutchison Telecom.
While it has not been possible to confirm these reports independently, Jeremy Lau, a spokesman at Hutchison Whampoa, which owns 49% of Hutchison Telecom, told BusinessWeek.com that Hutchison Telecom was in talks with several unnamed potential buyers. He did, however, confirm reports quoting Hutchison Whampoa finance director Frank Sixt as saying the company would only entertain offers in excess of $14 billion for its stake.
Hitting Pay Dirt In other words, Hutchison figures the company is worth no less than $21 billion. And the way the bidders are circling, it seems likely that it will go for a lot more. Whatever the outcome, the big winner is likely to be billionaire Li, who controls Hutchison Whampoa as part of a vast empire ranging from ports and property to supermarkets and Internet portals.
It certainly looks as if Mr. Li, who has a reputation for being a consummate deal-maker with nearly impeccable timing, has hit pay dirt once again. Back in June, Hutchison Telecom increased its stake in Hutchison Essar by 5.11% for $450 million, valuing the company at just $8.8 billion.
Though Hutchison Whampoa could not provide BusinessWeek with the original cost of its investment in Hutchison Essar, a good chunk of what it did spend was recouped when it spun off Hutchison Telecom in an initial public offering in Hong Kong and New York in October, 2004.
Bargain Shopping Indeed, Li has often displayed an uncanny sense of knowing when to cash in his chips. In 1999, he pocketed nearly $20 billion in profits when Hutchison sold British cellular carrier Orange to Mannesmann at the height of the tech boom. Later that year Hutchison got $5.9 billion for its share of U.S. cellular carrier VoiceStream Wireless—which it had bought for just $1.3 billion.
He also picked up a majority stake in Global Crossing for just $250 million for assets valued at $22.4 billion when the company filed for bankruptcy in 2002. In the first half of this year, Hutchison booked a $3.14 billion profit on the sale of a 20% stake in its port unit, the world's largest, to Singapore PSA International.
But the 78-year-old Li does have one problem. His biggest gamble to date is on 3G wireless services in Europe. The group has spent an estimated $20 to $25 billion on licenses and other related investments since it began building the 3G service in 2000. Originally meant to break even in 2005, 3G lost Hutchison Whampoa $1.54 billion in the first half. The asset sales help offset the cost of the 3G venture.
Keeping His Fan Base Li has built a personal fortune worth more than $18 billion since he immigrated from China decades ago. He is venerated by hundreds of thousands of Hong Kongers, who call the reclusive tycoon chiu yan (Superman). Faith in Superman's powers to make a killing remains steadfast among Hong Kong's cab drivers and office cleaners, who dutifully queue up for hours to buy shares whenever he takes a new company public. The stock deals don't always pay off so handsomely. Shares in Hutchison-linked Tom Group, the media company previously known as Tom.com when it listed in 2000, are trading at less than half its IPO price.
Even online portal and wireless services operator Tom.online (TOMO), which said on Dec. 20 it was getting a majority stake in a new joint venture with eBay (EBAY) (see BusinessWeek.com, 12/20/06, "eBay's Last China Card"), is trading just 6% up from its 2004 IPO offer price. Yet Hong Kongers still venerate the man who amassed the city's greatest private fortune and whose deft hand is now seen in India.
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