Telefonica Looks to Halve Stake in China Unicom (CHU) as Debt Issues Linger
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Telefonica SA (NYSE: TEF) shares are looking robust early Monday following reports over the weekend it will look to exit a significant portion of its stake in China Unicom (NYSE: CHU).
Ailing from recent turmoil in Spanish debt and banking, Telefonica will look to divest about half its holdings in China Unicom as it looks to shore up books and capture some of the appreciation realized in Uncom's stock.
Telefonica will sell 1.07 billion Unicom shares for gross proceeds of about $1.4 billion (or HK$11 billion).
The move comes following a seven-year joint venture. At a price of HK$10.21 per share, the amount is 22 percent less than Telefonica's carrying value, noted Bloomberg on Monday morning. The company promised not to sell any more Unicom shares for the next 12 months.
CEO Cesar Alierta is looking to trim some of the €57 billion debt Telefonica has on its books. The company is said to have spent $85 billion since 2000 on acquisitions, and a recent downgrade of company debt by Standard & Poor's last month as well as recent debt issues in Spain is leaving investors anxious for Telefonica to make some sort of move to reduce risk. Telefonica is looking to trim six billion to eight billion euros of debt by the end of 2012. One consideration being mulled is a potential IPO of its 20 percent stake in Germany's O2, which might raise as much as two billion euro.
Unicom's shares will be sold to its state-owned parent company, China United Network Communications Group.
Telefonica stock hit its high mark for 2012 at the start of the year, ending just higher than $17.25. Since then, the stock has fallen 30 percent.
Shares of Telefonica are indicated 1.5 percent higher early Monday.
Ailing from recent turmoil in Spanish debt and banking, Telefonica will look to divest about half its holdings in China Unicom as it looks to shore up books and capture some of the appreciation realized in Uncom's stock.
Telefonica will sell 1.07 billion Unicom shares for gross proceeds of about $1.4 billion (or HK$11 billion).
The move comes following a seven-year joint venture. At a price of HK$10.21 per share, the amount is 22 percent less than Telefonica's carrying value, noted Bloomberg on Monday morning. The company promised not to sell any more Unicom shares for the next 12 months.
CEO Cesar Alierta is looking to trim some of the €57 billion debt Telefonica has on its books. The company is said to have spent $85 billion since 2000 on acquisitions, and a recent downgrade of company debt by Standard & Poor's last month as well as recent debt issues in Spain is leaving investors anxious for Telefonica to make some sort of move to reduce risk. Telefonica is looking to trim six billion to eight billion euros of debt by the end of 2012. One consideration being mulled is a potential IPO of its 20 percent stake in Germany's O2, which might raise as much as two billion euro.
Unicom's shares will be sold to its state-owned parent company, China United Network Communications Group.
Telefonica stock hit its high mark for 2012 at the start of the year, ending just higher than $17.25. Since then, the stock has fallen 30 percent.
Shares of Telefonica are indicated 1.5 percent higher early Monday.
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