Merger approval in Macedonia removes biggest obstacle for stalled Telekom Slovenije privatisation

By bne IntelliNews July 9, 2015

The biggest hurdle for the stalled privatisation of Telekom Slovenije was removed on July 8, after the Macedonian competition watchdog approved the merger of the telecom’s Skopje-based unit One with its peer Vip, controlled by Telekom Austria.

However, the fate of the privatisation remains uncertain, pending the official announcements of the parties involved on whether they plan to proceed with the negotiations on the sale of Slovenia’s most profitable firm, or would rather scrap the whole process.

In mid-June, the privatisation talks hit a dead-end after the sole bidder, UK investment fund Cinven, placed additional conditions related to the delayed telecoms merger in Macedonia. Cinven had made the last-minute changes in order to reduce risks related to the delayed merger, saying this could affect the approved transaction value by €100mn. It even asked the Slovenian Sovereign Holding (SDH), which is in charge of the privatisation, for a €10 discount of the agreed share price (reportedly at €130), but SDH turned down Cinven’s last-minute changes saying they represent a too bigger risk for the consortium of sellers.

Still, the two parties said in June that even though they could not iron out their differences to proceed with the talks at that time, they remain committed to completing the deal at a later stage or on different terms.

According to a July 8 report of daily Finance, Cinven will announce in 14 days whether it would proceed with the privatisation talks. The report added that the buyer’s representatives have recently reaffirmed their interest in the deal.

The daily pointed out that another risk for the privatisation might come from the fact that SDH will soon get a new supervisory board that could easily hinder the sale. This is not unlikely, bearing in mind the great political interference in the process so far, which is lengthening the process and has certainly turned away many eligible bidders.

In mid-April, when SDH announced that the tender attracted only one bid, that of Cinven, the news was disappointing for the market, as it was expected that Deutsche Telekom and US-based investment fund Providence would also participate, creating stronger competition and a good basis for negotiations on raising the sales price.

Following the tender outcome announcement, Telekom Slovenije shares plunged 10% in one day from their level of some €130 apiece, and have been on the fall since then amid the constant uncertainties surrounding the process.

On July 8, the telecom’s share price closed down 2.11% to €88, illustrating the damages made to the company in just several months because of the constant complications. Moreover, being the largest and most valuable company on the list of 15 state-controlled firms that Ljubljana plans to sell, Telekom Slovenije’s privatisation has been in the public eye ever since its launch last year, with citizens and opposition parties staging several demonstrations to call on the government to cancel the privatisation.

According to unofficial information, Cinven’s initial bid submitted in April offered €110mn per Telekom Slovenije share, which was considerably below the anticipated €180 and lower than the market price of €130 per share at the time. After public and political opposition to the sale of one of the country’s top companies, especially at such a discount, Cinven improved its bid to €130 in May.

Concerning the Macedonian merger, in late 2014 Telekom Austria and Telekom Slovenije agreed to merge their Macedonian units into a joint company majority controlled by Telekom Austria and giving Telekom Slovenije the option to then exit the newly-formed operator with the exit reportedly valued at €100mn. The merger was expected to be completed in the first quarter of 2015.

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