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source from：wsj
BUSINESS
New Blow for Li Ka-shing as EU Hangs Up on O2 Deal
Tycoon faces setback with 14 billion dollars bid for U.K.’s second-largest cellphone operator torpedoed
By WAYNE MA
May 4, 2016 3:35 a.m. ET
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HONG KONG—Asia tycoon Li Ka-shing has long been one of the biggest foreign investors in the U.K., plowing billions of dollars into water and natural gas utilities, railcar leasing and telecoms.
But his latest foray—an at least 14 billion dollars bid to acquire the U.K.’s second-largest cellphone operator—has hit a roadblock with European regulators, who will come out against the deal Wednesday, according to people familiar with the matter. The setback would deal a blow to Mr. Li’s efforts to pivot his empire away from China toward Europe and may also lessen his appetite for deals in that region.
The 87-year-old billionaire, who heads ports-to-retail conglomerate C.K. Hutchison Holdings Ltd., prefers investing in places with stable political environments such as Europe and industries with predictable returns such as telecoms, according to people familiar with his thinking. They say Mr. Li has shied away from highly regulated economies, which are harder to operate and profit in.
Earlier this year, Mr. Li said that if the U.K. votes to exit from the European Union, he would turn more cautious and cut investments in the country. However, Mr. Li said he was confident the split wouldn’t happen.
Now the tycoon must reconsider his investment strategy with the torpedoing of his deal to purchase U.K. cellphone operator O2—owned by Spain’s Telefónica SA—and merge it with his existing carrier, Three. CK Hutchison declined to comment.
The EU’s 28 commissioners are set to approve a decision by its antitrust watchdog to block the merger after Hutchison and Telefónica failed to assuage concerns the deal would lead to higher prices and less choice for U.K. consumers, people familiar with the matter said.
The EU’s latest antitrust chief, Margrethe Vestager, has taken a tougher stance than predecessors on telecom mergers in the region, particularly where the deal reduces the number of mobile-telecom operators from four to three, as would be the case in the U.K.
The commission’s decision may bode ill for Hutchison’s plans in Italy to merge its 3 Italia business with Russian telecom firm VimpelCom Ltd.’s Wind Group -- another so-called “four-to-three” merger. Hutchison, which has in recent years been buying and merging with other mobile carriers in Europe in a bid to cement itself as one of bloc’s top wireless providers, can appeal the commission’s decision in the U.K. case.
“Any future moves to consolidate within the region—including CK Hutchison’s planned merger with Wind in Italy, which is also being investigated by the same body—will be subject to significant doubt,” said Kester Mann, an analyst at CCS Insight.
Mr. Li was Asia’s richest man for decades before he was surpassed recently by Chinese property mogul Wang Jianlin, according to Forbes. Over the past five years, Mr. Li has upped his bets on Europe as he trimmed assets in China, where people familiar with the matter say he has been concerned with the unpredictable regulatory and legal environment.
The U.K., which Mr. Li has long considered a haven, accounted for 37% of C.K. Hutchison’s operating profit last year when compared with a combined 19% for mainland China and Hong Kong, which was a British colony until 1997.
Mr. Li has strong political ties stretching from former British premier Margaret Thatcher to current Prime Minister David Cameron, who in 2013 joined Mr. Li on a visit to Oxford University where the tycoon established a health-care research center on campus bearing his name. Mr. Li was knighted by the Queen of England in 2000 and has donated millions of dollars to Oxford and the University of Cambridge, where he holds an honorary degree.
The boldest move made by the tycoon in the U.K. was in the early 2000s, when his flagship company sunk about 25 billion dollars to roll out high-speed third generation, or 3G, networks in the U.K. and Italy. After dragging down profits for nearly a decade, the bet finally paid off in 2010, when it turned its first profit -- though growth has still been slow.
Mr. Li’s failure to consolidate the European telecommunications sector may hurt Hutchison’s bottom line. The O2 deal would have made it easier to justify plans to build out costly 4G network infrastructure due to better economies of scale, analysts and CK Hutchison executives said.
Mr. Li doesn’t take kindly to regulatory interference, according to people familiar with his thinking. He hasn’t done a deal in the U.S. since 2003, when he withdrew a 250 million dollars bid for Global Crossing Ltd., which at the time operated the world’s largest fiber-optic network. He pulled out after the Committee on Foreign Investment in the U.S. opened a probe, amid concerns that Mr. Li was too close to China and shouldn’t be allowed to control a system of strategic importance to the U.S.
The blocked O2 merger would be the second setback for Mr. Li in six months, after his attempt to buy and merge a cash-rich affiliate Hong Kong power company with his infrastructure arm was blocked by shareholders, who believed the offer was too low.
—Natalia Drozdiak and Valentina Pop contributed to this article
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