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The Deal: Exxon Mobil Sells Hong Kong Assets

Tickers in this article: XOM

NEW YORK (TheStreet) Exxon Mobil has agreed to sell controlling stakes in two Hong Kong electricity businesses for HK$26 billion ($3.35 billion), striking a deal for the unwanted operations after more than nine months of talks.

CLP Holdings, Hong Kong's largest electricity producer, said Tuesday, Nov. 19, that it had teamed with China Southern Power Grid International to buy Exxon Mobil's 60% stake in Castle Peak Power and had struck a separate deal to buy Exxon Mobil's 51% holding in Hong Kong Pumped Storage Development.

CLP will pay HK$12 billion for 30% of Castle Peak and HK$2 billion for the majority holding in Pumped Storage, increasing its stakes in the companies to 70% and 100%, respectively. China Southern Power did not say how much it had paid for its 30% stake in Castle Peak, though CLP executive Betty Yeun told reporters that the deal was done on the same terms as her company's acquisition.

"The transactions give CLP majority control over our generation assets and enable us to better coordinate our generation business with the transmission and distribution operations," CLP CEO Richard Lancaster said in a statement.

CLP, formerly China Light and Power, is listed on the Hong Kong exchange and is controlled by the Kadoorie family. It first announced that it was in talks to buy Castle Peak in mid-March.

The deals value the two companies' combined operations at about 13.3 times their 2012 earnings and equates to an enterprise value of about 7.9 times Ebitda for 2012, CLP said in a presentation on Tuesday.

Striking the deal in partnership China Southern Power cements a strategic partnership that could help CLP to expand operations on the Chinese mainland, the Hong Kong-based company added.

CLP will finance the acquisition with its own cash and new bank facilities including an HK$10 billion loan from HSBC.

Exxon Mobil spokespeople could not immediately be reached for comment.

CLP shares closed Tuesday at HK$62.25, up HK$0.55, or just under 1%, on their Monday close.

Written by Paul Whitfield in New York