February 3, 2012 / 12:36 AM / 8 years ago

UPDATE 5-Hutch to buy Orange Austria as Asia firms shop in Europe

* Corporate Asia making number of European plays this year

* Deal to boost Hutchison’s presence in Austrian market

* Hutch to sell some Orange Austria assets to Telekom Austria

* Hutch shares jump over 3 pct in a flat overall market

* France Telecom says cash proceeds 70 mln euros (Adds comments from news conference)

By Denny Thomas

HONG KONG, Feb 3 (Reuters) - Hong Kong’s Hutchison 3G will buy Orange Austria from France Telecom and a private equity fund in a deal valued at 1.3 billion euros ($1.7 billion) including debt, expanding the corporate footprint in Europe of one of Asia’s richest men.

The deal by the unit of Hutchison Whampoa follows a cluster of outbound M&A transactions from Asia in early 2012 as firms with large cash piles and low debt buy assets in Europe, where economies are struggling with the debt crisis.

Hutchison said on Friday it would buy 100 percent of Orange Austria, confirming an earlier Reuters story. Hutchison shares rose as much as 3.8 percent to HK$76.20 on the news, bucking a flat overall market.

Hutchison, controlled by Hong Kong billionaire Li Ka-shing, has been shopping for regulated infrastructure and utility assets in developed countries, especially Britain, which is open to foreign ownership of its infrastructure assets.

“It is a good opportunity for those financially strong companies to buy assets in Europe, especially if they believe in the strong growth prospect,” said Conita Hung, head of equity research at Delta Asia Financial Group.

Li’s business empire bought British utility Northumbrian Water Group for 2.41 billion pounds ($3.81 billion) last year, having paid 5.8 billion pounds to buy the British electricity distribution network of France EDF in 2010.

Li, a high-school drop-out nicknamed “Superman” by Hong Kong media for his deal-making savvy, started out with a plastic flower business and now has a global empire with 26,000 employees in 55 countries.

So far in 2012, Asian corporates have launched about $9.3 billion worth of outbound deals, compared with $181 billion worth transactions attempted the whole of last year, according to Thomson Reuters data.

High-profile deals this year include Shandong Heavy Industry Group’s purchase of a 75 percent stake in debt-laden Italian yacht-maker Ferretti Group and China Investment Corp’s purchase of an 8.7 percent stake in the holding company of Thames Water, the privately-held UK utility.

No.3 IN AUSTRIA

Hutchison 3G Austria already operates under the ‘3’ brand, competing against Deutsche Telekom AG’s T-Mobile and Telekom Austria’s A1. T-Mobile has a 31 percent market share and A1 has 47 percent.

Hutchison said the deal would make it Austria’s third-biggest mobile phone operator, with 2.8 million customers and a 22 percent market share. The two units had combined revenues of more than 700 million euros in 2011.

In Vienna, Hutchinson 3G Austria chief Jan Trinow told reporters the combined entity aimed to control a third of the market in the medium term and could generate 500 million euros in synergies over time.

He said he hoped for anti-trust approval by mid-year and said the Orange brand would be phased out eventually.

“Overall, we do think the deal offers one of the few relatively visible paths to long-term sustained profitability for 3 Austria,” Bank of America/Merrill Lynch said in a report.

As a second leg of the deal, Hutchison will sell some of Orange Austria’s assets to Telekom Austria for 390 million euros, Telekom said separately.

The assets comprise frequencies, base station sites, mobile phone operator YESSS! Telekommunikation GmbH and certain intellectual property rights, the statement added.

Hutch’s net consideration is 900 million euros, giving the business an enterprise value to EBITDA multiple of 6.9 times.

Bank of America/Merrill Lynch said that the multiple paid by Hutch “is at the high end of comparable private transaction multiples, but below the 7.6 previously speculated.”

EXIT LOW-GROWTH MARKETS

For France Telecom, the sale is the second deal in an ongoing portfolio review aimed at exiting low-growth mature markets and returning cash to shareholders. It recently agreed to sell Orange Switzerland to private equity group Apax Partners for about 1.6 billion euros.

Orange Austria is jointly owned by France Telecom and Mid-Europa Partners.

France Telecom said it expected cash proceeds of 70 million euros from the sale of its 35 percent equity stake in the Austrian business, which had around 1 billion euros of debt. It described the move as “another milestone in the optimisation” of its asset portfolio following the Swiss transaction.

The French company will likely now announce a share buyback programme for up to around 800 million euros, or half of the proceeds of the two sales, according to Raymond James analysts.

“This would also leave more than enough to pay for half of the acquisition of minority interests in Mobistar while the other half would be paid by potential tax synergies,” the analysts said, referring to the Belgian mobile phone operator in which France Telecom is majority shareholder.

Shares in France Telecom were steady, lagging the French bluechip CAC 40 index, and have fallen about 5.5 percent so far this year.

Hutchison also owns 3G wireless network operations in Britain, Italy and Australia, among other countries. It competes with Britain’s biggest mobile operator, Everything Everywhere — a joint venture of Orange and T-Mobile — Telefonica SA’s O2 and Vodafone Group Plc.

The wireless business had been losing money over the past decade, but broke even in the second half of 2010 and recovered further last year. Hutchison said it was expected to contribute to the conglomerate’s profits in the second half of 2011.

J.P. Morgan advised Hutchison group on the purchase, while Morgan Stanley advised the sellers, a source familiar with the process said. The source was not authorised to speak to the media. ($1 = 0.7592 euros) ($1 = 0.6321 British pounds) (Additional reporting by Donny Kwok, James Regan and Angelika Gruber; Editing by Jonathan Hopfner, John Mair and Mark Potter)

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