HSBC to Provide Hutchison With $9 Billion Loan for O2 Deal--Update

By Prudence Ho And Yvonne Lee 

HONG KONG-- HSBC Holdings PLC is providing Hutchison Whampoa Ltd. with GBP6 billion (US$9 billion) in loans to fund the conglomerate's $15 billion acquisition of one of Britain's biggest cellphone operators, people with direct knowledge of the deal said Monday.

Hong Kong-listed Hutchison, part of Hong Kong billionaire Li Ka-shing 's global empire, said last week that it is in exclusive talks to buy 02 from Spain's Telefonica SA for GBP9.25 billion in cash, plus up to GBP1 billion that would be paid later if the combination of O2 with Three, Hutchison's existing British carrier, meets cash-flow targets.

The HSBC loan will cover only part of the $15 billion acquisition. On Friday, when Hutchison said it was in talks to buy O2, Hutchison Finance Director Frank Sixt said the deal would be funded by bank loans but gave no further details. He said that once Hutchison buys O2, it will sell as much as 30% of the company to institutional partners, including private-equity firms.

HSBC, which is advising Mr. Li on the purchase, is also helping the 86-year-old tycoon reorganize his empire into two companies, separating his Hong Kong property assets from his internationally focused conglomerate.

As part of that reorganization, HSBC and Bank of America Merrill Lynch will provide Mr. Li's new property firm, Cheung Kong Property Holdings, with a HK$55 billion (US$7.1 billion) bridge loan, or the real-estate unit could get funding from a syndicated loan, according to the stock-exchange filing earlier this month outlining the reorganization. Cheung Kong Property will be created out of the real-estate holdings of Mr. Li's flagship, Cheung Kong Holdings, and its 49.97%-owned Hutchison.

The O2 acquisition will likely take around a year to be completed, the people with knowledge of the deal said. Hutchison said the deal is subject to regulatory approvals.

The O2 purchase caps a busy few weeks for Mr. Li in Europe, with his companies also announcing takeover bids for a British train-car maker and a Dutch drugstore chain. Besides being Mr. Li's biggest-ever foreign acquisition, the O2 deal represents the largest purchase overseas by an Asian firm since Japan's SoftBank Corp.'s $21.6 billion buyout of Sprint Nextel Corp in Oct. 2012, according to Dealogic.

Write to Prudence Ho at [e-mail] and Yvonne Lee at [e-mail]

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