Czech billionaire Petr Kellner’s PPF investment group has agreed to acquire a 65.9% stake in Telefonica Czech Republic from the Spanish incumbent for Kc63.6bn (US$3.32bn).
PPF will finance the deal, which values the shares at Kc305.6 (US$15.96) each,…
Czech billionaire Petr Kellner’s PPF investment group has agreed to acquire a 65.9% stake in Telefonica Czech Republic from the Spanish incumbent for Kc63.6bn (US$3.32bn).
PPF will finance the deal, which values the shares at Kc305.6 (US$15.96) each, with an equity tranche of Kc35.5bn (US$1.85bn) and a syndicated loan facility provided by a consortium led by Societe Generale, the company said in a statement.
The deal value is in line with expectations – media have speculated that PPF would not pay much more than the stake’s market value, which is currently around US$3.37bn.
The transaction values the whole of Telefonica CR at about €4.4bn (US$5.94bn), or an EV/2014E EBITDA multiple of about 5.8x.
As part of the deal, PPF, which claims to own about €22.11bn (US$29.82bn) of assets across multiple markets in Central and Eastern Europe as well as Asia, will also acquire Telefonica CR’s fully-owned subsidiary Telefonica Slovakia (Telefonica SK).
Telefonica will retain a 4.9% equity stake in Telefonica CR – the Czech Republic’s largest telco. The Madrid-based operator will receive €2.06bn (US$2.78bn) in cash at closing and €404m (US$545.16m) in deferred payments over four years.
As expected, PPF said it will launch a mandatory tender offer for the remaining shares in Telefonica CR upon completion of the transaction, which is subject to clearance from the European Commission. Telefonica has formally agreed not to accept the offer for its remaining 4.9% stake.
The agreement provides that Telefonica CR and SK will be able to use Telefonica’s O2 brand for up to four years. The newly-acquired companies will also be allowed to remain part of the Spanish carrier’s business partners programme – which allows for roaming and other enterprise alliances – for the same period.
Telefonica CR said it had 5.1 million mobile customers and 1.4 million fixed-access lines at the end of June. The Slovak business has an extra 1.4 million mobile customers. The Czech business competes with the local units of the UK’s Vodafone and Germany’s Deutsche Telekom, and the national regulator is aiming to make room for a fourth player via its upcoming 4G spectrum auction.
Bernstein Research analysts said in a note to investors that they believe the sale marks “one of the next steps in Telefonica’s transformation”, cutting debt and giving it greater flexibility to participate in consolidation in Brazil by making a bid for Telecom Italia’s TIM Brasil, as well as further investments in Europe.
Telefonica will generate a capital loss of about €56m (US$75.56m) on the sale in Q3, they noted.
Telefonica, working to cut net debt to about €47bn (US$63bn) by the end of the year, has made numerous disposals and acquisitions recently. The company agreed to sell its Irish unit to Hutchison Whampoa for €850m (US$1.15bn) earlier this year, which is awaiting antitrust clearance from the European Commission (EC).
Telefonica has also agreed to increase its stake in Telecom Italia’s controlling shareholder group, Telco, through a €441m (US$595.08m) investment, and to acquire KPN’s German unit E-Plus for €8.55bn (US$11.54bn). The latter deal is also awaiting clearance from the EC.
