Cheung Kong Infrastructure Holdings (CKI), the largest publicly-listed infrastructure company in Hong Kong controlled by tycoon Li Ka-shing, on September 8 announced a merger proposal with Power Assets Holdings (PAH) to create a diversified infrastructure company as it seeks to further expand its business.

CKI is offering 1.04 shares for every PAH share not owned by Li's companies in a stock-for-stock merger. The exchange ratio was determined based on the average closing price of CKI shares and PAH shares on the Hong Kong stock exchange for the five trading days up to (and including) September 4 2015. CKI also intends to declare a conditional special interim dividend of HK$5 per CKI share to all CKI shareholders.

For CKI, the proposed merger would give the company with a stronger balance sheet and significant cash balance to capture global opportunities for the enlarge CKI group in the broader infrastructure sectors. The unified platform will have a clear investment mandate and will unite the investor base currently split between CKI and PAH.

Following the completion of the proposed merger, seven projects in which both CKI and PAH have ownership interests are expected to become consolidated in CKI's financial statements. As of June 30 2015, there were 11 projects in which both CKI and PAH had ownership interests. The total net assets of those projects attributable to each of CKI and PAH represented around 62.6% of the adjusted total assets of CKI and 66.9% of the adjusted total assets of PAH.

The completion of the merger will see PAH becoming a wholly-owned subsidiary of CKI. CK Hutchison Holdings will remain as the controlling shareholder of CKI with about 49.19% stake, but it is expected that CKH Holdings will no longer consolidate CKI as a subsidiary. The significantly larger free float of CKI shares, both in terms of percentage and the number of shares, should also enhance the liquidity of the stock.

HSBC has been appointed as sole financial adviser to CKI and Assets Global International, while Anglo Chinese Corporate Finance has been engaged as independent financial adviser to the respective boards of CKI and Assets Global.