Hong Kong's HKBN confirms talks with I Squared
HKBN, one of Hong Kong’s leading broadband internet providers, has confirmed that negotiations with infrastructure investor I Squared Capital over a potential acquisition are ongoing.
The company received a preliminary proposal last month that would see it absorbed by HGC Global Communications, an existing I Squared portfolio company. The board said in a filing that it has yet to form any view about the possible offer nor reached any formal agreement with a prospective acquirer.
Should the transaction proceed, it would bring about further consolidation of the territory’s internet, communication and telecommunication (ICT) space and underline how such assets have transitioned from private equity to infrastructure.
HKBN’s stock climbed more than 20% in the days following I Squared’s initial approach. As of early trading on April 4, it was down slightly at HKD 5.68, giving the company a market capitalisation of HKD 7.5bn (USD 955m) and a price-to-earnings multiple of approximately 15x. Previous reports have suggested any offer could value HKBN at more than USD 1bn.
The company was acquired by CVC Capital Partners from Hong Kong Television Network in 2012 for HKD 4.87bn and listed in 2015. MBK Partners and TPG Capital then bought Wharf T&T from Wharf Holdings for HKD 9.5bn and I Squared carved out Hutchison Telecommunications’ fixed-line telecom business at a valuation of HKD 14.5bn, outbidding several private equity competitors.
MBK and TPG exited Wharf T&T to HKBN for HKD 10.5bn in 2018. I Squared renamed the Hutchison business HGC Global and turned it into a telecom, data centre services, ICT solutions, and broadband services provider with an extensive fibre-optic network, five cross-border telecom routes, and one of Hong Kong’s largest Wi-Fi operators. The company has over 29,000 hotspots across the territory.
HKBN has a 34% market share of residential broadband services and 37% of the enterprise segment. Its network spans 2.5m homes and 8,000 commercial buildings and facilities. In addition to broadband, it offers mobile, fixed-line, over-the-top entertainment and music streaming, and smart home services to residential customers and a range of ICT solutions to business customers.
Revenue reached HKD 11.6bn for the 12 months ended August 2022, up 1% year-on-year. Enterprise solutions was the largest contributor, generating HKD 4.4bn. Adjusted EBITDA rose 2% to HKD 2.6bn and net profit climbed more than 100% to HKD 553.3m, driven in part by falling financing costs.
I Squared closed its third global infrastructure fund last year at the hard cap of USD 15bn. The firm raised USD 7bn in the previous vintage.
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