LJUBLJANA (Slovenia), June 16 (SeeNews) – Telekom Slovenije [LJE:TLSG] was sharply lower in early morning trading on the Ljubljana bourse after UK private equity fund Cinven said the conditions were no longer in place to proceed with the acquisition of the incumbent telco.
Telekom Slovenije was trading down 5.68% at 88 euro ($99.4) by 0950 CET on the Ljubljana bourse on Tuesday. The telco closed down 5.85% Monday when it ended trading with a market capitalization of 609.8 million euro.
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Early on Tuesday morning, Cinven said a solution to deal with the uncertainty around the merger of the telco's Macedonian operations could not be agreed with Slovenian state holding company SDH.
On Monday, SDH, which coordinates the privatization process in the country, said it does not accept the additional conditions imposed by Cinven for the acquisition of a 72.75% stake in Telekom Slovenije.
"On that basis, the conditions to proceed with the transaction now are not in place. Cinven remains interested in the privatisation of Telekom Slovenije and open to re-evaluate the situation in the coming weeks, once the outcome of Macedonia is clarified," Cinven said in its Tuesday statement.
SDH has said the additional conditions set by Cinven represented too great a risk and could lead to an unjustified reduction in the purchase price but that it was still ready to complete the transaction under the conditions approved by its supervisory board on June 10.
In April, SDH said a single binding bid had been handed in for the sale of the stake in the incumbent telco. Cinven later confirmed it had placed the offer.
Last Wednesday, SDH said its supervisory board had approved the sale of the telco stake to Cinven, subject to certain conditions.
SDH said at the time it received on June 9 amendments to the revised binding offer by Cinven, which were not considered by the supervisory board because the conditions from those amendments were not acceptable for the managing board.
Earlier on Wednesday, Cinven issued a statement saying that since submitting its best and final offer for the acquisition of Telekom Slovenije on May 22, it was informed on June 1 by SDH of further unexpected delays in the antitrust approval processes and completions of the Debitel acquisition and Macedonian operations merger by Telekom Slovenije.
On Thursday, Cinven said it considers the amendment an integral part of the offer, without which Cinven would not be able to proceed towards completing this transaction.
Saso Stanovnik, head of research at investment company Alta Invest, told SeeNews in an email on Tuesday he believes Cinven pushed too far with risk sharing mechanisms.
"Their bid in terms of EBITDA multiple was not high enough to be additionally hampered by different risk transfers to existing owners. Also all issues in Macedonia are true, as well as risks, however, this was known before the first offer. It took time for the state entities to accept the first offer, it was therefore logical any additional lowering of the price (albeit most likely temporarily) will be impossible to accept."
Should the deal with Cinven collapse, Alta Invest expects Telekom Slovenije's stock price to slump to 80-85 euro over the short term.
"The additional risk is very low liquidity during the summer months. This implies enterprise value/EBITDA of 4.2 on trailing-twelve-months data. In the autumn and winter everything would depend on [the company's] results and thereby dividend expectations. This year Telekom Slovenije paid 10 euro per share and while it’s hard to expect this level of dividend payment to continue, it should still provide a generous amount. This above-average dividend yield could, in time, lift the stock back to current levels," Stanovnik said.
In October, Telekom Slovenije - which operates as a fixed and mobile services provider in Slovenia, Bosnia, Kosovo and Macedonia, and Telekom Austria Group said they had agreed to merge their Macedonian units.
In January, Macedonia's competition protection commission said it was inviting public comments on the planned business concentration to be filed within ten days after the publishing of the relevant notice after which it will take a final decision on the merger.
In February, Telekom Slovenije said it had signed a deal to acquire 100% of Slovenian mobile carrier Debitel Telekomunikacije and that the transaction will be concluded after obtaining approval from competition protection authorities.
In 2013, Telekom Slovenije was placed on a list of 15 state firms earmarked for privatization.
Cinven, set up in 1977, has offices in Guernsey, London, Frankfurt, Paris, Milan, Luxembourg and Hong Kong.
($=0.885 euro)