STC begins Vodafone Egypt due diligence
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M&A WATCH- STC begins Vodafone Egypt due diligence: Saudi Telecom (STC) has begun doing due diligence on Vodafone Egypt ahead of a possible USD 2.4 bn acquisition of Vodafone Group’s 55% stake in the company, unnamed sources told Youm7. The Saudi firm signed a MoU with Vodafone Group at the end of January to purchase its stake in Vodafone Egypt in a sale that would value the company at USD 4.4 bn.
It remains unclear whether STC will be forced into purchasing the entire company: Sources in the Financial Regulatory Authority said following the announcement that STC would be legally compelled to launch a mandatory tender offer (MTO) for the remaining 45% stake held by state-owned Telecom Egypt (TE). STC is reportedly trying to find ways around this, but it remains unclear how it plans to circumvent the FRA or whether it will be successful doing so.
TE may yet thwart the acquisition: In a signal that it is seriously considering using its right of first refusal, TE directed its financial advisors EFG Hermes and Citibank to look into how it could finance the purchase of Vodafone Group’s stake in the company ahead of STC. Under its original agreement with Vodafone Group, TE is entitled to make a counter offer prior to STC’s bid being accepted.
And it might not: TE hasn’t actually raised any direct objections to STC purchasing its stake, and analysts have pointed out that it would be in its own interest to exit the company, given its high levels of debt.