Hong Kong-listed infrastructure giant CK Hutchison Holdings (CKHH) has agreed to sell its European tower assets and businesses to Cellnex Telecom for 10 billion euros (US$11.8 billion). Cellnex is Europe’s leading operator of wireless telecommunications and broadcasting infrastructure.

The transaction unlocks the underlying value of the European telecommunication tower assets and businesses portfolio for CKHH subsidiary CK Hutchison Group Telecom (CKHGT). CKH Networks holds CKHGT’s interests in the European telecom tower assets and businesses in Austria, Denmark, Ireland, Italy, Sweden and the United Kingdom.

The 10 billion euro deal consists of 1.4 billion euros in new shares equating to approximately 5% stake in Cellnex on an enlarged share capital basis and the balance in cash. CKHGT’s partner in Denmark and Sweden is expected to receive 5% of the total consideration when it is received by CKHGT.

The agreement is structured as six separate transactions – one for each country – with closing in each country whenever the relevant conditions for the transaction are met. The first transactions are expected to close by the end of December 2020 and the others will occur in 2021.

CKHH said the deal helps to partially unlock the value of CKHH’s telecommunications division, which has not been fully reflected in its share price in recent years, in addition to realizing significant capital gains and net cash proceeds, which will reduce the group's net financial indebtedness and strengthen its financial profile.

Adjusted for this transaction, CKHH’s reported net debt to net total capital ratio as of June 30 2020 would decline from 25.1% to 14.9%, further strengthening the financial capacity of CKHH and CKHGT to support future growth and potential M&A opportunities.

In order to support the rollout of 5G across the group’s networks, CKHGT will also enter into long-term service contracts with Cellnex in each relevant jurisdiction regarding the provision of passive telecommunications infrastructure services. It will also strategically partner with Cellnex to roll out approximately 6,700 additional sites across the six countries. The contracts are for an initial period of 15 years which can be extended for an additional 15 years.

"We are pleased to gain a long-term partner in Cellnex while unlocking value in our telecom assets for our shareholders,” says Canning Fok, CKHH’s group co-managing director. “This will improve our operational efficiency and accelerate 5G rollout, put us in a very good position if the right opportunities arise, and provide us an opportunity to enhance our shareholders’ returns."