Cheung Kong firms to buy Ista from CVC for €4.5bn

The HK-based investors see the German company as an opportunity to gain a foothold in the European sub-metering market. But the deal comes at a time of increased government scrutiny on foreign acquisitions of critical infra. 

Cheung Kong Infrastructure and Cheung Kong Property Holdings – both controlled by Hong Kong tycoon Li Ka-shing – have formed a joint venture to acquire German energy asset management company Ista Group, in a deal valued at up to €4.5 billion.

The two Hong Kong-listed CK companies are attracted by the stable cashflows and growth prospects offered by Ista’s integrated energy management businesses in Europe, where it has a key presence. “It will provide CKPH with the valuable opportunity to invest in the European sub-metering market, which is consistent with the company’s global diversification strategy,” states CKPH.

The CK pair will acquire the majority stake in Ista from CVC Capital Partners’ fifth fund. CVC has invested in Ista for 14 years, since the original investment through CVC Fund III in 2003, according to Marc Strobel, a partner at the Luxembourg-headquartered buyout firm. 

“We have enjoyed a close partnership with the company as it has grown from a German-centric analogue business into a digital European energy efficiency champion,” Strobel said. “As the energy efficiency market continues to expand across Germany and Europe, Ista is now perfectly placed for future growth, with a strong management team and a stellar product offering,” he added. 

Ista helps property managers, home owners and tenants to measure, analyse, bill and manage individual energy and water consumption through a range of hardware devices and communication systems. The company has more than 5,400 employees and operates in 24 countries. 

Once all the necessary approvals are obtained and the transaction is completed, CKPH will indirectly hold 65 percent of the German company, with CKI holding the remaining 35 percent. But the deal comes at time of increased government scrutiny on critical infrastructure acquisitions, with the German government recently tightening its foreign investment rules.

CKPH, the core business of which is developing flats in Hong Kong, has been looking to expand its investments into infrastructure and aircraft leasing. This May, it completed an investment in Australian energy manager DUET Group, in partnership with CKI and another CK Group affiliate, Power Assets, for about $5.9 billion. 

CKI, on the other hand, has been investing in infrastructure businesses in Hong Kong, China, the UK, continental Europe, Australia, New Zealand and Canada, with net assets of about $14 billion. 

CKI and Power Assets said last week in their interim reports that they have been looking for “sizeable capital-intensive deals” for further growth opportunities and were ready to form joint ventures to pursue large-scale opportunities that offer a “unique competitive edge”. 

The proposed Ista transaction, subject to customary regulatory and anti-trust approvals, is expected to close in Q4 this year.