Deutsche Telekom and Cinven are expected to present binding bids below market value for Telekom Slovenije on Monday.
Offers valuing the company at 5.5x EBITDA would be a “disappointment” to the government, which had been hoping for bids more along the…
Deutsche Telekom and Cinven are expected to present binding bids below market value for Telekom Slovenije on Monday.
Offers valuing the company at 5.5x EBITDA would be a “disappointment” to the government, which had been hoping for bids more along the lines of 6.5x EBITDA (or €140 per share), a local analyst told TelecomFinance.
The German incumbent and London-based private equity firm are likely to bid about €110 (US$116.4) per share, Reuters cited a source familiar with the process as saying.
Meanwhile, Slovenian newspaper Dnevnik reported that the suitors would offer about €115 (US$121.7) per share.
Saso Stanovnik, head of research and chief economist at Alta Invest in Ljubljana, told TelecomFinance that a price of €110 per share – roughly 5.5x guided EBITDA – would be a disappointment to the local financial community.
“Given the current low-yield financing environment and potential for cost optimisation, this seems a bit too low,” he said.
Two years ago, his team estimated bidders would offer between 5.5x and 6.5x EBITDA, which Stanovnik said now translates to about €150 to €180 per share.
“We should expect [bids] more in line with 6.5x EBITDA (at least €140 per share) now given the environment, some recent transactions and the consideration that €10 per share of dividends is proposed.”
However, he noted that risk factors include the fact that it is not publically known how much Telekom Slovenije could get for its planned exit from Macedonia and the lawsuits facing the company.
Stanovnik had previously said that while the incumbent settled one major lawsuit recently, about €300m in claims remain outstanding. That said, he noted that the telco’s management is confident it can win the cases and, even if it doesn’t, it is likely to have to pay “just a small fraction” of the damages.
The lawsuits, to do with alleged abuse of dominant market position, have affected the telco’s share price recently, raising questions as to whether the privatisation will proceed.
Potential security issues surrounding the privatisation raised by recently-dismissed defence minister Janko Veber have also had an impact. Veber, a deputy leader of coalition member party the Social Democrats, was voted out by parliament yesterday for directing the country’s secret service to look into the potential security issues.
At the time of writing, Telekom Slovenije’s shares were trading at €132.60 each on the Ljubljana stock exchange, giving the company a market capitalisation of €866.6m (US$917.37m).
Cinven has confirmed its interest in buying a majority stake in the incumbent, while Deutsche Telekom, which has assets in other parts of Central and Eastern Europe, is considered by many to be the favoured bidder.
Prime Minister Miro Cerar has repeatedly insisted that the privatisation of Telekom Slovenije – one of multiple companies slated for privatisation in Slovenia – will go ahead.
The state, which is receiving financial advice from Citigroup on the sale, owns 72.38% of Telekom Slovenije. The remaining shares are held by individual shareholders, local and foreign companies, institutional investors, brokerage houses and the company itself.
