Shareholders of diversified telecom operator Digi Communications, the parent company of Romania's RCS & RDS, aim to obtain up to RON1.2bn (€264.9mn) from the sale of 21.7mn shares in the company in an initial public offering, according to the prospectus published on the Bucharest bourse website.
The IPO of Digi Communications will follow the December 2016 IPO of healthcare provider Medlife, the first of a Romanian private company since the onset of the global financial crisis. It is expected to be the largest IPO of a private company on the Bucharest Stock Exchange and to help revive the Romanian capital market.
The offer price in the IPO is expected to be between RON38 and RON56 per share, the company said. A number of factors will be considered in determining the offer price, the share offer size and the basis of allocation, including the level and nature of demand for the offer shares during the bookbuilding process, the level of demand in the retail tranche, prevailing market conditions and the objective of establishing an orderly after-market in the offer shares.
The company will not receive any of the proceeds from the sale, all of which will be paid to the selling shareholders. The offer is made up of two tranches: the retail tranche and the institutional tranche. Applications for the purchase of shares in the retail tranche can be made between April 28 and May 10.
It is expected the offer shares will start to be traded on Bucharest Stock Exchange on or around May 16 under the symbol “DIGI”.
Citigroup and Deutsche Bank are joint global co-ordinators and joint bookrunners for the IPO, while Societe Generale Corporate & Investment Banking BRD - Groupe Societe Generale, Raiffeisen Bank and WOOD & Company Financial Services are joint bookrunners. BT Capital Partners is joint bookrunner and lead manager.
Currently, the issued share capital of the company consists of 65,756,028 Class A shares with a nominal value of €0.10 each (all of which were fully paid) as well as 34,243,972 Class B shares with a nominal value of €0.01 each (all of which were fully paid).
According to the prospectus, the company posted a net profit of €11.8mn last year, up from €4mn a year before. The Romanian operations accounted for €612.7mn, or 72.7%, of the total revenue; the Hungarian operations accounted for €137.9mn, or 16.4%, of the total revenue; the Spanish operations accounted for €83mn, or 9.9%, of the total revenue and the Italian operations accounted for €9.2mn, or 1.1%, of the total revenue.
Digi Communicationms is a leading provider of telecommunication services in Romania and Hungary based on number of revenue generating units (RGUs). Its offering in both countries include cable and DTH television services, fixed internet and data and fixed-line telephony. The fixed telecommunication and entertainment services are offered through our technologically advanced fibre optic network, covering approximately 62% and 24% of households in Romania and Hungary, respectively.
The company’s principal shareholder is Zoltan Teszari who owns 56.93% of the company directly and indirectly.
On April 26, S&P Global Ratings raised its long-term corporate ratings on RCS & RDS and its parent DIGI Communications to 'BB-' from 'B+'. The outlook on both entities is stable. It also raised the issue rating to 'BB-' from 'B+' on the senior secured notes issued by Digi.
The upgrade reflects Digi's strong performance in 2016 and the ratings agency's expectation that its revenue and EBITDA will continue to strengthen in coming years. S&P also expects credit ratios will remain strong despite relatively modest free operating cash flow (FOCF) stemming from continued high investments in growth opportunities.
The Bucharest Stock Exchange (BVB) has become more attractive after it was included on the FTSE Russell Watchlist for a potential upgrade to emerging market status. FTSE Russell announced in September last year that the Romanian capital market was on its list of countries with “substantial potential” to be upgraded in the short or medium term. A decision on whether to upgrade Romania is due to be made this year.