Vodafone has slightly better of CK Hutch’s UK sale

Vodafone

05/05/2026 16:48

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Jennifer Johnson

LONDON, May 5 (Reuters Breakingviews) - Vodafone VOD.L is taking control of its UK joint venture with CK Hutchison’s 0001.HK Three – several years ahead of schedule. The $36 billion British telco's original merger agreement with Hong Kong's Li clan included a clause allowing the former to acquire CK Hutch's 49% stake in 2029 for 16.5 billion pounds ($22 billion) including debt. The actual 14 billion pound ($19 billion) enterprise value at which Vodafone boss Margherita Della Valle is doing the deal is therefore something of a coup – albeit one that her shareholders may not wholeheartedly welcome.

Della Valle is indeed getting a good deal. At 17.3 billion pounds, Citi analysts' sum of the parts for VodafoneThree implies CK Hutch could have held out for 6.1 billion pounds to part company with its stake, factoring in 5 billion pounds of net debt. Even so, Vodafone investors aren't exactly celebrating. By mid-afternoon on Tuesday the group’s shares had dipped by 2%.

Their lack of enthusiasm is likely down to newly reduced expectations for hard near-term cash. Because Vodafone is funding its deal with existing cash reserves, net debt will rise to 2.6 times the London-listed company's adjusted EBITDA after leases – near the top end of its 2.2 to 2.75 target range. That could mean that Della Valle gets less generous with her share buybacks in coming years.

Arguably, CK Hutch’s investors are in an equal and opposite place. In recent years the group – which also has holdings in the ports, retail and energy sectors – has been trading at just 40% of its book value, per LSEG data. Victor Li, the son of founder Li Ka-shing, has been working to offload assets to boost the lowly valuation.

With such a chunky conglomerate discount, CK Hutch shareholders are probably content to turn some of that value into hard cash now, even if it means they're leaving something on the table. A 4% bump in the group's share price on Tuesday may encourage Li to focus further on simplifying his portfolio, rather than sweating the details.

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CONTEXT NEWS

CK Hutchison said on May 5 it has agreed to sell its 49% stake in the VodafoneThree joint venture to partner Vodafone for 4.3 billion pounds.

The groups completed the merger of their UK mobile businesses last year. As part of the deal, Vodafone was granted the option of buying CK Hutchison’s stake after three years provided the group reached an enterprise value of 16.5 billion pounds.

Shares of CK Hutchison were up by 4% at close in Hong Kong, while Vodafone’s were flat in London at 0930 GMT on May 5.

Valuations at CK companies have trended down for much of the last decade https://www.reuters.com/graphics/BRV-BRV/zgpolereqvd/chart.png

(Editing by George Hay; Production by Streisand Neto)

((For previous columns by the author, Reuters customers can click on JOHNSON/Jennifer.Johnson@thomsonreuters.com))