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Thursday, 6 February 2020

Telecom Egypt to hire an investment bank to oversee STC’s MTO for Vodafone

M&A WATCH- Market regulator confirms STC must submit MTO for 100% of Vodafone Egypt, prompting TE to look for advisors: Telecom Egypt (TE) is in the market for an investment bank to advise it on the mandatory tender offer (MTO) Saudi Telecom Company (STC) is required to submit for TE’s shares in Vodafone Egypt, the state-owned company said in a bourse statement (pdf). This comes as the Financial Regulatory Authority (FRA) confirmed that STC is required under the Capital Market Act to submit an MTO for the 44.8% stake in Vodafone Egypt owned by TE and the 0.2% held by minority shareholders if it closes its bid to acquire Vodafone Group’s 55% stake.

Who’s in the running for the job? TE is reportedly fielding offers from four potential advisors, the local press says, citing a government official. According to the official, a choice will be made within only “a few days.” Vodafone Group has yet to announce who it has hired as its investment bankers.

Where STC’s acquisition offer currently stands: STC had signed a non-binding MoU to purchase Vodafone Group’s 55% stake in Vodafone Egypt in a USD 2.39 bn cash agreement last week. The sale values 100% of Vodafone Egypt at USD 4.4 bn and would give STC a 42% share of Egypt’s telecommunications market.The agreement is valid for another 75 days and subject to renewal, but all signs suggest so far that the transaction is moving forward. Telecom Egypt (TE) has raised no objections to the sale and has telegraphed that it will not exercise its right of first refusal under its shareholder agreement with Vodafone Group.

Moody’s says the agreement could squeeze STC’s margins and push the company into negative credit rating territory if the MTO is entirely debt-funded, especially in light of the telecom operator’s recently inaugurated 5G network. The pinch wouldn’t be catastrophic though as Moody’s estimates expect STC recoup the costs by diversifying its revenue base and exploiting lower labor costs in Egypt, reports Zawya.

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