hta massive dilution

i reckon minority shareholders should reject this offer, hong kong billionaire is attempting to dilute minority shareholders just prior to hta becoming more profitable.

article from smh 19/03/2007 below.

Third generation (3G) network services provider Hutchison Telecommunications (Australia) plans to raise up to $2.85 billion in equity and pay down the massive debt it used to finance its loss-making 3G business.

A reorganisation of Hutchison Telecom's capital structure was flagged in May last year but a capital raising - which is asking shareholders to buy another 20 shares for each share they currently own - was not the expected option.

Investors paid $2 per share in the company's IPO in 1999. The same shares traded at 20 cents at 12 noon today.

Hong Kong billionaire Li Ka-shing will take up most of the raising via his majority stake in the telecom which is owned by his holding company Hutchison Whampoa Ltd (HWL).

HWL is also underwriting the offer, which could deliver Mr Li more than 90 per cent of Hutchison Telecom shares. This would then allow him to mop up minority interests and take the company private although this is not on the cards, the company said.

Hutchison said it is strongly supported by HWL, which is committed to maintaining a listing for Hutchison the Australian Securities Exchange.

The equity raising will reduce the company's debt substantially, improving its bottom line position through the reduction of funding costs.

"Backed by considerable investment in the company, 3 has achieved strong growth since its launch, reaching a number of significant milestones," chief executive Nigel Dews said.

"It is now appropriate to address the level of debt carried by the company."

Following completion of the rights issue, Hutchison's debt is expected to reduce to approximately $1.1 billion.

The telco will raise the funds by way of a pro-rata renounceable rights issue of convertible preference at 21 cents each which will convert into 0.85 of an ordinary share.

"The rights issue will allow Hutchison to improve its capital structure for the benefit of all shareholders," said chairman Canning Fok.

In May last year Mr Fok told a shareholders' meeting that the company would be reconsidering its capital structure in the wake of a "disappointing" share price response to the underlying improvements in its business.

"With convertible notes maturing next year, and improved visibility of the shape of the business, the optimum capital structure will be re-evaluated," Mr Fok said.

One option was to get rid of an equity overhang by converting $600 million worth of convertible notes, most of which are held by Mr Li, into shares.

A buyout of minority shareholders was considered the most likely option by analysts.

Hutchison is not currently considered a genuine investment stock as its market cap of around $140 million is dwarfed by debt in the billions, most of which is backed by Mr Li's companies