(Bloomberg) — PCCW Ltd., the telecommunications group controlled by Hong Kong tycoon Richard Li, is in advanced talks to sell a significant minority stake in its fiber business to China Merchants Group Ltd., according to people familiar with the matter.
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PCCW is close to selling 40% of its fiber optics unit to the Chinese state-owned conglomerate for $850 million to $900 million, the sources said, speaking on condition of anonymity because the discussions are private. PCCW and China Merchants are finalizing details and an announcement could be made as soon as the coming weeks, the sources said.
Financing has been arranged for the deal, which could be done through private equity unit China Merchants Capital, the sources said. Selling the stake would help PCCW raise cash and grow its fiber business, they said.
PCCW’s American Depositary Receipts rose 5.3% following Bloomberg News’ report on a possible sale, the largest increase since March 5. Hong Kong-listed PCCW shares rose 1.8% in early trading on Wednesday, also the biggest gain in two. month. The Hang Seng Index was little changed.
The talks are ongoing and could further be delayed or fail, the sources said.
A PCCW representative declined to comment. China Merchants Capital did not respond to a request for comment.
China Merchants is considering bidding for a stake in the fiber sector after negotiations between PCCW and Abu Dhabi’s sovereign wealth fund over the assets broke down, Bloomberg News reported in March.
China Merchants dates back to 1872 and operates businesses ranging from ports, transportation and finance to real estate and healthcare.
(Updates with stock price movements in fourth paragraph.)
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