HC2 Holdings, Inc. (NYSE: HCHC) says its Marine Services Segment, Global Marine Group (GMG), has agreed to sell its 49% stake in Huawei Marine Networks Co., Ltd. to Hengtong Optic-Electric Co Ltd. for approximately $140 million. HC2 also stated that Hengtong has reached an agreement with Huawei, which holds the other 51% of the Huawei Marine joint venture, to buy the rest of the company from Huawei. That statement confirms a Reuters report from this past June (see "Huawei to sell Huawei Marine stake to Hengtong: Reuters"). Terms of the agreement with Huawei have not been released.
The agreement calls for GMG to sell 30% of its interest in Huawei Marine initially and retain the other 19% under a two-year put option agreement at the greater of the same equity value ($285 million) or fair market value. HC2 says it expects the transaction to close in the first quarter of 2020, subject to customary closing conditions.
HC2 says the transaction is part of a strategy to leave the submarine network market. “We are very pleased at the outcome of the joint venture sales process,” said Philip Falcone, chairman, president, and CEO of HC2. “We want to thank our partners at Huawei, with whom we have had a great working relationship since our acquisition of GMG five years ago, for successfully growing the joint venture and completing over 98 projects globally since inception. Inking this deal now further sets the stage for a potential sale of GMG, including the main operating subsidiary, Global Marine Systems Ltd., which continues to be a top priority for us as we close out 2019.”
The Huawei Marine was created in 2009. The pending sale is part of a trend that has seen submarine network deployment companies in play as submarine cable construction booms. TE Connectivity sold its SubCom unit to Cerberus Capital Management in November 2018 (see “Cerberus wraps up TE SubCom buy, names new CEO”). EKINOPS investigated the acquisition of Alcatel Submarine Networks earlier this year but decided against such a purchase (see “Ekinops drops pursuit of Alcatel Submarine Networks”).
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