Hutchison Whampoa Ltd. probably will pull out of a deal to buy a stake in Global Crossing Ltd., leaving Singapore Technologies Telemedia as the sole candidate to take control of the telecommunications company, a source familiar with the situation said Tuesday.
Hutchison’s expected decision comes as the U.S. government has intensified its formal probe of the deal by Global Crossing, which filed for bankruptcy protection in January 2002, to sell a majority stake to the two Asian companies for $250 million, people familiar with the situation said.
That agreement has run into problems with U.S. national security officials who balked at Hutchison’s ties to China. Hutchison has offered concessions to distance itself from the daily operations of Global Crossing, but that apparently has failed to satisfy U.S. national security officials, sources said.
Hutchison, which is controlled by Hong Kong’s richest man, Li Ka-shing, has not made a final decision to exit and still could find a way to keep its hand in the deal, one source said.
Global Crossing and Singapore Technologies declined to comment. A spokesman for Hutchison Whampoa did not return calls seeking comment.
Even if Hutchison walks away, U.S. lawmakers may object to a deal that has Singapore Technologies as the main buyer because that company is a unit of Temasek Holdings Ltd., the investment arm of the Singapore government.
Changes in the deal would mark the latest setback for Global Crossing, the operator of a fiber-optics network in 27 countries. The company filed for bankruptcy protection after buckling under $12.4 billion in debt in a market hit by a weak economy, steep competition and a glut of network capacity.
Hutchison and Singapore Technologies had agreed in August to acquire the 61.5% stake in Global Crossing for $250 million. Under the deal’s terms, an investor can walk away without penalty before April 30.
The Committee on Foreign Investment in the United States, which is made up of national security and economic officials including the Defense and Treasury secretaries, has gone through a 30-day review of the deal and has extended it for 45 days, the sources said.