Hutchison Delays 3 Italia IPO

Hutchison Whampoa Ltd. (Hong Kong: 0013; Pink Sheets: HUWHY) said over the weekend it's indefinitely scrapping plans to spin off its 3 Italia unit, opting instead to sell off 10 percent of the 3G operator in a €420 million (US$500 million) private placement. (See Hutchison Defers 3 Italy IPO.)

In a prepared statement, Canning Fok, Hutchison's Group Managing Director and 3 Italia's Chairman, blamed the decision on "weak" conditions in Europe's telecom market, adding: "In the circumstances, I do not believe that the market would ascribe an appropriate valuation to 3 Italia's business on its IPO at this time." [Ed. note: We don't give a Canning Fok.]

The IPO has been put off repeatedly but looked set to go ahead as the Italian securities regulator approved the plan last week. (See Eurobites: Ownership Issues and 3 Italia Gets IPO Clearance.)

The fund managers involved in the deal have reportedly valued 3 Italia at around €7 billion ($8.33 billion), while Hutchison reckons the business is worth at least €9 billion ($10.71 billion). "3 Italia is not experiencing the same negative operating performance or outlook as incumbent mobile operators in Italy and Europe," said Fok. The operator leads the 3G market in Italy, ahead of Telecom Italia (TIM) and Vodafone Italy , while in Europe, carriers such as Orange (NYSE: FTE) and Vodafone Group plc (NYSE: VOD) have recently issued profit warnings. (See FT Warns, Europe Quakes and Vodafone Reports Q3 KPIs.)

Goldman Sachs & Co. has agreed to underwrite the private placement, which will give shareholders an indirect share interest that they can exchange for 3 Italia shares when it does finally go public. The deal values the operator at €9 billion -- still far less than the €12 billion to €15 billion Hutchison was after last year.

Hutchison had hoped the IPO would set a benchmark for the value of its other 3G businesses and pave the way for a listing of its Three UK U.K. unit this year.

Goldman and UBS AG have downgraded their ratings for Hutchison, while Standard & Poor’s maintained its credit rating, saying the delay has only reinforced its "negative" outlook. (See S&P Maintains Hutch Rating.) Shares in Hutchison fell 2.57 percent Monday to close at HK$73.95 (US$9.48).

— Nicole Willing, Reporter, Light Reading

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