Polish DTH platform Cyfrowy Polsat has agreed to buy a majority stake in the owner of local mobile operator Polkomtel in a PLN5.15bn (US$1.65bn) deal.
Cyfrowy will issue 243.93 million new shares to finance the transaction, which will be taken up by…
Polish DTH platform Cyfrowy Polsat has agreed to buy a majority stake in the owner of local mobile operator Polkomtel in a PLN5.15bn (US$1.65bn) deal.
Cyfrowy will issue 243.93 million new shares to finance the transaction, which will be taken up by shareholders in Metelem Holding Company, the sole owner of Polkomtel.
Following the merger as it is currently structured, Metelem shareholders Argumenol Investment, Karswell and Sensor will own 7.52%, 20.47%, and 10.14%, respectively of Cyfrowsy Polsat.
The new Cyfrowsy shares are valued at PLN21.12 (US$6.78) each.
Cyfrowy also wants to acquire the remaining 16.2% stake in Metelem held by the European Bank for Reconstruction and Development (ERBD).
Talks with EBRD are ongoing but, if the bank accepts its offer, Cyrfrowy will issue an extra 47.26 million new shares. In this case Argumenol would own 7.09% in Cyfrowsy after closing, while Karswell would have 19.29%, Sensor 9.55%, and the EBRD 5.77%.
Both Cyfrowy and Metelem are controlled by billionaire Zygmunt Solorz-Zak.
The deal values Metelem at PLN6.15bn (US$1.97bn), implying an EV/EBITDA ratio of 5.7 times, excluding synergies, Cyfrowy said, adding that this is below the trading multiples of peers and recently-completed transactions.
The buyer’s management board estimates the deal will generate operational synergies of about PLN3.5bn (US$1.12bn) and financial synergies of PLN500m (US$160.45m), brought about by better debt terms, through to 2019.
The deal will create Poland’s largest media and telecoms group with estimated annual revenue of nearly PLN10bn (US$3.21bn), according to Cyfrowy.
Cyfrowy plans refinancing
The company expects the deal to close in Q2 2014, but it is subject to Cyfrowy shareholders approving the issue of shares to Metelem shareholders, as well as the successful refinancing of Cyfrowy’s existing debt. Cyfrowy expects it will complete the refinancing by Q2 2014.
Cyfrowy and Metelem’s combined net debt totals PLN12bn (US$3.85bn), or 3.1 times their joint EBITDA, Cyrfrowy said, adding that it wants to reduce this to below 2.5 times by the end of 2016.
Cyfrowy expects to be able to lower this debt by utilising the significant and stable free cash flows that will come from the merged entity.
Its management board president Dominik Libicki said he believes the deal will provide both Cyfrowy and Polkomtel with new opportunities in their highly competitive markets.
“The strategy of Cyfrowy Polsat Group, based on providing the best entertainment and telecommunication services using the latest technologies on all consumer devices, remains unchanged,” he said.
“Polkomtel fits in perfectly and provides a fantastic opportunity for significant acceleration of its execution”.
Polkomtel board member Wojciech Pytel highlighted that he expects significant operational and financial synergies, and noted that Polkomtel would be able to provide customers with a “unique” combination of products and services from both companies.
Back in 2011, Solorz-Zak acquired Polkomtel, which operates under the brand name Plus, for PLN18.1bn (US$5.8bn)– Poland’s biggest ever leveraged buyout.
The mobile operator is Poland’s most profitable phone company with 14 million clients, 7.4 million of whom are on contracts, according to Cyfrowsy, which claims to serve more than 3.5 million households.
