Hong Kong tycoon Li Ka-shing has offered $11.6 billion in stocks to merge its infrastructure arm, Cheung Kong Infrastructure Holdings (CKI), with utility affiliate Power Assets Holdings through a share swap mechanism for further expansion into the public utility industry, the Shanghai-based online news outlet the Paper reported on Thursday.
Once the merger is completed, Power Assets Holdings, Li's sole Hong Kong-listed company, will cease to exist and be delisted from the Hong Kong burse, thus officially completing the 87-year-old business magnate's plan to move the incorporated base of all of his companies away from Hong Kong, the report said.
The merger is the second major restructuring of Li's business empire this year after he combined his two blue-chip flagship companies Cheung Kong (Holdings) and Hutchison Whampoa into CK Hutchison Holdings, then to Cheung Kong Property Holdings in June. Both CK Hutchison and CK Property are incorporated in the Cayman Islands and CKI in Bermuda.
CKI holds a 38.9-percent stake in Power Assets. According to a merger proposal issued on Sept. 8, CKI will offer its shares in exchange for Power Assets shares owned by other shareholders. All the other shareholders of the merged company will also receive a special dividend of HK$5 ($0.64) and the new firm will be listed under the new name CK Infrastructure Assets (Holdings).
CK Hutchison Holdings will still remain a controlling shareholder with a 49.9-percent stake in CK Infrastructure Assets, although the combined firm will have a better liquidity position due to an increase in publicly held shares.
Established more than 10 years ago, CKI has investments in transportation infrastructure, energy infrastructure, water infrastructure and other infrastructure-related materials businesses. It is currently Hong Kong's largest listed infrastructure company and is managed by Li's elder son, Victor.
Power Assets started to make investments outside China in 1999, with businesses in the U.K., Australia and Canada. In 2011, the firm's earnings from overseas operations surpassed its gains in Hong Kong for the first time.
Li has also begun to unload his assets in Hong Kong and mainland China and acquired infrastructure companies in the U.S. and Europe in recent years, with CKI Infrastructure and Power Assets serving as the main platform for conducting foreign acquisitions of public utility firms, especially following the EU debt crisis.
In 2014, both firms and Cheung Kong Holdings jointly acquired Australian natural gas distributor Envestra for $2.22 billion.
Following the two rounds of massive restructuring operations this year, Li has shifted the incorporated base of all his listed businesses abroad from Hong Kong as part of his efforts to hand over the businesses to Victor, causing observers to question Li's hidden intention of withdrawing from Hong Kong, the Want China Times newspaper reported on Friday.
Li refuted the accusations, saying that listing CK Hutchinson Holdings and CK Property Holdings in the Cayman Islands is designed mainly to secure a greater flexibility in global financial operations for the companies.