Hutchison to cash in China stake for $1.8bn
By Justine Lau in Hong Kong and Neil Buckley in New York
Published: May 11 2004 12:55 | Last Updated: May 11 2004 20:18
Looks like a pull out!
Hutchison Whampoa, the conglomerate which has suffered heavy losses at its third-generation mobile phone operation, is to realise almost $2bn in cash by selling its stake in a China joint venture to its partner, Procter & Gamble.
Hutchison, controlled by Li Ka-shing, Asia's richest man, said it would book a HK$13.7bn (US$1.76bn) gain from the sale of its 20 per cent stake, which is expected to be completed in June. The operation produces and distributes hair and skin care products.
Hutchison's move is seen as another attempt to offset growing losses at its 3G operation, which hit a record loss of HK$18.3bn last year. The losses are expected to peak in 2004.
P&G-Hutchison was set up by the two companies in 1988. At that time, P&G owned about 69 per cent while Hutchison had the rest. In 1997, Hutchison sold 10 per cent of its stake to a P&G subsidiary and it had planned to exit the venture in 2007.
Analysts said the price P&G was paying initially seemed high for a business with sales of around $2bn. But the joint venture's 30 per cent annual growth rate coupled with the fact that P&G would have had to pay much more if it had waited until 2007 as planned was seen as justifying the price.
They added that the move was a sign of P&G's confidence in the Chinese market and its ability to succeed alone there.
AG Lafley, P&G's chairman and chief executive, said it was the "right time for P&G to assume full ownership".
P&G has market-leading brands of shampoo, conditioner, moisturiser and baby care products in China, with number two positions in laundry detergent, feminine care and toothpaste.
Hutchison's need for cash became more pressing when NTT DoCoMo said it was considering selling its 20 per cent stake in Hutchison's 3G venture in the UK, months after Dutch operator KPN Telecom pulled out.
Its 3G business suffered a slow start last year and failed to meet subscriber targets. The company has been slashing prices aggressively and said it would sell more assets this year in a bid to cushion the negative impact of the new service.
Last week, priceline.com made a filing to US regulators which will allow Hutchison and Cheung Kong, another company controlled by Mr Li, to net about US$249m by selling 10m shares in the internet travel portal.
Hutchison has also announced plans to list telecommunication businesses that analysts said could help it reap US$1bn. |
