KEY POINTS:
The world's 11th richest man may have succeeded in his second attempt at buying into New Zealand, with the purchase of Vector's Wellington electricity network for $785 million.
Vector announced yesterday it had agreed to sell its Wellington lines business to Cheung Kong Infrastructure Holdings (CKI), the Hong
Kong-based global infrastructure owner and operator.
Li Ka-shing, named by Forbes magazine this year as the world's 11th richest man with a net worth of US$26.5 billion, is the chairman and significant shareholder in CKI parent company Cheung Kong Holdings - the flagship of a group with around 260,000 employees and operations in 56 countries.
It is not the first time the Libusiness empire has extended its reach as far as New Zealand.
In 2006, another Cheung Kong company, Hutchison Port Holdings, linked with Christchurch City Holdings in a bid for half of Lyttelton Port. The bid failed after Port of Otago bought a blocking stake.
Vector said yesterday it was optimistic shareholders and the Overseas Investment Office would approve the sale of the Wellington business.
Government ministers this month vetoed a bid by the Canada Pension Plan Investment Board to buy a stake in Auckland International Airport.
But Vector chairman Michael Stiassny said he did not expect any difficulties on the overseas ownership front.
He said no strategic land was involved and the network had had two overseas owners in the past: Alberta-based TransAlta and Missouri-based Aquila.
The Auckland Energy Consumer Trust, which owns 75 per cent of Vector, said it was in favour of the sale.
"There is no doubt the trustees will support the Vector board in its recommendation," chairman Warren Kyd said. The five AECT trustees had met over the weekend to discuss the sale as it was no surprise the deal had been "in the melting pot".
Cheung Kong's 79-year-old chief, Li, was born the son of a schoolteacher in the Chinese coastal city of Chiu Chow, before moving to Hong Kong in 1940 after bombing raids by Japan.
He dropped out of school before he was 15 to sell plastic flowers to support his family after his mother died.
By 1950 he had started his own company - Cheung Kong Industries. He is nicknamed "Superman" in his home city of Hong Kong. He has been awarded numerous honours, including Knight Commander of the Order of the British Empire.
Cheung Kong Infrastructure is controlled by Li. It has assets and operations in Australia, including interests in Melbourne's CBD electricity network, as well as Britain, Canada, mainland China and Hong Kong.
Vector expects to make a profit of $195 million from the $785 million deal.
The proceeds of the sale would be used in the first instance to reduce debt, Stiassny said.
It would reduce the company's gearing from around 60:40 to 50:50 and leave it well placed to take advantage of any other infrastructure investment opportunities that might arise.
Vector was not looking at anything in particular right now, Stiassny said.
"But we believe the environment will be such that there will be opportunities and we would rather be prepared to take them than wish we had some space on our balance sheet."
AECT's Kyd said the sale would have all sorts of benefits for Vector's balance sheet. He said the trust took advice from investment bank ABN Amro and believed $785 million was a fair price.
One market analyst agreed it was a good price, saying there had been talk six months ago about a $1 billion deal but he did not believe the assets were worth that much. He also felt there would be no problems with Overseas Investment Office approval.
Ratings agency Standard & Poor's said it was reviewing Vector's BBB+ future risk appetite and strategic growth following its announcement of the sale.
The sale of the Wellington network reduced the business diversity of Vector and marginally weakened its business profile, the agency said.
However, these factors should be offset by the company's decision to apply the sale proceeds to reduce debt.
The Overseas Investment Office said the application for the sale would take a month to process, and would then be referred to the Government to make the final decision.
Vector does not have to wait for the office's approval before taking the matter to a shareholder vote.
LI KA-SHING
* World's 11th richest person.
* Net worth of US$26.5 billion.
* Hong Kong citizen.
* Chairman of Cheung Kong Holdings.
* Nicknamed "Superman".
CHEUNG KONG GROUP
* Spans 56 countries, with about 260,000 employees.
* Includes Cheung Kong Infrastructure and Hutchison Whampoa.
* Interests include property, hotels, telecommunications and ports.
* HK$809 billion market capitalisation of listed firms.
THE DEAL
* Cheung Kong Infrastructure has agreed to pay $785m for Vector's Wellington network.
* This consists of powerlines, poles and some substations, which sit on a small amount of land.
* The Wellington distribution network supplies electricity to Wellington City, Porirua and Hutt Valley, with a system length of over 4592km serving 162,075 connections.
