What Will Hutchison Do With $11 Billion?

Hutchison (HTX) shares fell 15% yesterday with uncertainty over its plans for the US$11.1bn cash that Voda is about to infuse the company with after the sale of around of 80% of its asset base. The prime operations remaining are mature assets in Hong Kong and Israel with early stage operations in Indonesia, Vietnam, Sri Lanka, Thailand and Ghana.

HTIL had net debt of HKD32,476bn (US$4.1bn) at the interims in June 2006 with approx US$2bn of the debt in the Indian operations. I think HTIL will be left with net cash of around US9bn at the close of the transaction. This is assuming that the transaction is tax free.

If I was in Hutchison Whampoa’s position I would seriously think about pumping the HWL 3G assets into HTIL: UK & Ireland, Italy, Scandinavia, Austria and Australia may finally find a home. HWL has tried and failed in the past to float some of its 3G operations and this is probably a once in a lifetime opportunity.

If this was to happen, I expect there would be squeals of protest from minorities in HTIL, but given that HWL is the controlling owner of HTIL they probably could do nothing about it. The “independent” valuation of the 3G assets is the key to the transaction. The reaction of Naguib Sawiris of Orascom and the largest minority shareholder in HTIL should be something to behold especially after his cocky statements yesterday.

The answer will be revealed on the 22nd February (.pdf) – I’m expecting a surprise or two.