Hutchison Whampoa, Cheung Kong unveil largest group restructuring

They're going "from vertical to horizontal".

According to Nomura, Hutch and parent company Cheung Kong (1 HK, not rated) jointly announced on 9th January their largest group restructuring since 1997. 

Here's more from Nomura:

We estimate HKD7.7-HKD16.9 per share of value accretion for Hutch shares (ie. 9-19% positive impact to Hutch’s last closing price), thanks to the unlocking of hidden value embedded under the existing vertical structure. We further project some additional positive share price drivers post-restructuring that should underpin longer-term upside potential on top of the initial removal of the holding company discount. 

Group structure is proposed to be changed from vertical to horizontal, with the formation of two new companies: an ex-property global conglomerate (CKH Holdings), and a pure property company (CK Property).

Deal terms – (1) Step one is to exchange each existing Cheung Kong share into one CKH Holdings share; (2) Step two involves CKH Holdings first acquiring a 6.24% stake of Husky from Li Ka Shing Trust, followed by exchanging each existing Hutch share into 0.684 new CKH Holdings share, and finally spinning off CK Property.

Upon completion, one existing Cheung Kong share will be exchanged into one CKH Holdings share and one CK Property share, while one Hutch share will be exchanged into 0.684 CKH Holdings share and 0.684 CK Property share. 

From a corporate management perspective, as various businesses (eg, property and infrastructure) began to overlap amongst the group companies, the vertical structure, which was originally created in 1997, has become increasingly unsustainable, in our view.

Management expect all the proposed transactions will be completed around the end of the first half of 2015.