Private equity groups lead by Bain Capital and Silver Lake Partners are reported to be leading the lengthy negotiations to take a stake in Huawei's mobile phone division. Closes close to the talks told Bloomberg news that General Atlantic has withdrawn from the discussions.
AEA Investors - which is partly backed by the Qatar sovereign investment fund had teamed up with General Atlantic, and may seek to join Bain or Silver Lake, the people said, asking not to be identified because the talks are confidential.
The valuation of Huawei's mobile phone division is also thought to have fallen thanks to the general economic slowdown.
Kohlberg Kravis Roberts (KKR) and Blackstone Group had been shortlisted in the talks, but did not pass the first round.
Huawei is looking to offload a stake in the company, party to increase its profile as a legitimate business when seeking overseas investments. The company was recently thwarted in its attempt to take a minority stake in US based 3Com following a backlash from US politicians over company founder and president Ren Zhengfei's military background. It is thought that an investment by a blue-chip company will make it easier for the parent firm to then accelerate its overseas expansion plans.
Huawei had been looking to sell a 49% stake in the company, but is understood to be interested in selling a majority stake if the price is suitable.
According to people who have seen the information memorandum produced by Morgan Stanley, the adviser hired by Huawei, the unit is this year expected to report revenues of $3.5 billion and produce net profits of about $400 million.
The company was recently reported as aiming to increase its handset production to 50 million units per year. Huawei currently outsources its handset manufacturing to Thailand based Cal-Comp Electronics and Singapore headquartered Flextronics.
On the web: Bloomberg
Posted to the site on 2nd September 2008
Posted to: www.cellular-news.com/story/33378.php