The European Commission plans a long look at CK Hutchison’s £10.3 billion offer for Telefonica’s O2 UK, but if the Hong Kong group wins through then an IPO of the combined entity is possible.
In a Financial Times interview, co-chief executive of CK Hutchison, Canning Fok, said a potential IPO of the combined entity had been discussed with external investors.
“There is a liquidity requirement by our investor group and one way to provide will be an IPO, which we will support,” said Fok, who did not provide a timetable. Five financial investors agreed to back Hutch’s bid in May.
Fok also said David Dyson, the CEO of 3 UK, will head the merged entity, ahead of O2 CEO Ronan Dunne. An O2 spokesman confirmed Dunne was stepping down post-takeover.
Before any IPO, the Hutch/O2 deal would first have to meet with regulatory approval. According to Reuters, the commission wants to launch an in-depth investigation into a deal which will see the number of UK operators reduced from four to three.
A recent merger proposal in Denmark to similarly reduce the number of operators floundered after Telia Sonera and Telenor were unable to accommodate the commission’s terms.
Hutchison is prepared to sell off network capacity and frequencies to head off competitive concerns, which is a familiar gambit, but in Denmark the commission pushed for introduction of a new operator.
The Hong Kong group submitted the O2 bid to the commission for approval on 11 September. Officially, the commission has until 16 October to decide on a next step, including escalating its investigation, but appears to have decided early that the deal warrants deeper scrutiny.
To further complicate the situation, the UK’s competition regulator might request to take on scrutiny of the deal from the commission.