HONG KONG (Reuters) – Telecoms group China Unicom is raising $11.7 billion from about a dozen investors including tech giants Alibaba Group (BABA.N) and Tencent Holdings (0700.HK), as part of Beijing’s push for state-owned enterprises to be revitalized with private capital.
The deal represents the largest capital raising in the Asia-Pacific region since insurer AIA’s (1299.HK) 2010 market debut, as per Thomson Reuters data. It would also be the biggest deal in recent years under Beijing’s “mixed-ownership” reforms.
The Chinese government is seeking to rejuvenate state behemoths with private capital, with China Unicom among the first batch of state-owned enterprises slated for the mixed-ownership reforms, whose guidelines were issued in 2015.
The board of China Unicom’s Shanghai-listed unit, China United Network Communications Ltd (600050.SS), has approved an issue of shares to the investors, who also include Baidu (BIDU.O), JD.com (JD.O) and some other firms.
Investors will get a combined 35.2 percent stake in the Shanghai unit and will be allotted three board seats, the group’s Hong Kong unit, China Unicom Hong Kong (0762.HK), said on Wednesday.
Reuters had first reported about the fund raising plans in June.
Other major companies that have agreed to invest in China Unicom include insurer China Life Insurance (601628.SS), ride-hailing company DiDi Chuxing, and Shenzhen-based Chinese technology conglomerate Kuang-Chi Group.
“The mixed ownership will raise the innovation capability of the company … allowing us to transform from a traditional operation to an integrated operator,” said Lu Yimin, president of China Unicom Hong Kong.
The deal is expected to be completed by end of the year, he said.
China Unicom group, formally known as China United Network Communications Group Co Ltd, is one of the world’s largest mobile carriers by user numbers but has faced a fiercely competitive market.
China Unicom group plans to use the proceeds to enhance its “4G capability, conduct 5G technical network trials and related business functions”, as well as invest in “innovative” businesses, the Hong Kong unit said in a presentation.
China has thousands of state-owned enterprises, many of them bloated and debt-ridden, and its mixed-ownership reforms are aimed at reviving the sector with private capital, creating stronger conglomerates capable of competing on the global stage.
Other state-owned enterprises selected to carry out Beijing’s pilot mixed-ownership reform scheme include China Eastern Air Holding [SASAHW.UL], China Southern Power Grid [CNPOW.UL] and China State Shipbuilding Corp [SASACN.UL].
China Eastern Air in June sold almost half of its freight unit to four firms, including Legend Holdings (3396.HK) and Global Logistic Properties (GLPL.SI), in the Chinese aviation sector’s first mixed-ownership reform deal.
For China Unicom, analysts have said mixed-ownership reform could be a game-changer – even if substantial restructuring will be difficult, with or without private investors.
The investors will subscribe to about 9 billion new shares and purchase 1.9 billion shares of the Shanghai-listed unit from China Unicom group at a price of 6.83 yuan per share, resulting in a total investment of about 78 billion yuan ($11.65 billion).
China Unicom group’s holding will fall to 36.7 percent from 62.7 percent after the deal.
Share trading in China Unicom’s Shanghai-listed unit has been halted since it said in early April it would be part of the government’s mixed-ownership pilot. It gave no further details at that time. The stock’s last close was at 7.47 yuan.
Prior to that suspension, the unit’s market value topped $23 billion. A person with direct knowledge of the matter told Reuters on Wednesday that the Shanghai shares were expected to begin trading on Thursday.
Reporting by Clare Jim, Donny Kwok, Anne Marie Roantree and Julie Zhu; Writing by Sumeet Chatterjee; Editing by Edwina Gibbs and Muralikumar Anantharaman