Emirates Telecommunications Corp. (ETISALAT), the United Arab Emirates’ most valuable company, agreed to acquire Vivendi SA’s controlling stake in Maroc Telecom SA for about 4.2 billion euros ($5.7 billion) in the Middle East’s largest takeover of a phone carrier.
The purchase price for the 53 percent holding, at 100 Moroccan dirhams a share in cash, includes a 7.4-dirham dividend to be paid to Vivendi, the Abu Dhabi-based carrier also known as Etisalat said today. In a separate release, Vivendi said it expects the deal to be completed in early 2014.
The takeover will hand Etisalat control over the biggest wireless carrier in Morocco, adding to its African operations that include Egypt and Nigeria. For Vivendi, selling telecommunications assets is a key part of the Paris-based company’s plan to transform into a new entity built around music, pay-television, European cinema and Internet in Brazil.
“This acquisition is positive for Etisalat given its existing strong presence in North Africa,” Shrouk Diab, an analyst at NBK Capital in Dubai, said by telephone. “If managed properly, Etisalat could derive a lot of cost synergies and revenue from the operations there.”
The price values Maroc Telecom at 6.2 times the company’s earnings before interest, taxes, depreciation and amortization, compared with a median of 9.5 times among its peers, according to data compiled by Bloomberg.
Overseas Expansion
Etisalat climbed 0.4 percent to close at 11.70 dirhams in Abu Dhabi, after rising as much as 1.3 percent. Vivendi was little changed at 18.71 euros at 3:23 p.m. in Paris.
Maroc Telecom closed at 98 dirhams in Casablanca yesterday. In Paris trading today, the shares fell as much as 4.9 percent.
Telecommunications companies in the Gulf Arab region are expanding abroad as domestic markets become saturated. Qatar’s Ooredoo, formerly known as Qatar Telecom, also bid for Maroc Telecom before withdrawing its offer in June because of what it called a “lengthy” sale process.
Since last year, Ooredoo has spent about $4 billion acquiring stakes in Kuwait’s National Mobile Telecommunications Co., Iraqi mobile operator Asiacell and Tunisiana SA.
Etisalat operates in 15 countries in the Middle East, Africa and Asia, according to its website. In Africa, where it has units in Sudan, Nigeria and Niger, its subscriber base grew 6 percent to 12 million users during the first nine months of the year.
Zain Fallout
Etisalat shut down its Indian unit, Etisalat DB, last year after India’s Supreme Court revoked 122 licenses in a corruption probe. The company also filed a lawsuit against the promoters of Swan Telecom in India. Two years ago, Etisalat ended talks to buy a majority stake in Zain, Kuwait’s biggest phone company, for $12 billion.
“The acquisition, if completed, would be Etisalat’s biggest in terms of buying into an existing operation,” said Sanyalaksna Manibhandu, an analyst at NBAD Securities LLC.
At home, Etisalat has lost market share to Emirates Integrated Telecommunications Co., also known as Du, after its monopoly over the U.A.E. market ended in 2007. Etisalat’s third-quarter income fell 18 percent to 1.83 billion dirhams ($498 million). Chairman Eissa Al Suwaidi said the operator is retaining and growing customers across all operations, and particularly in its domestic market.
Deal Financing
Al Suwaidi is a director of the Emirates Investment Authority, Etisalat’s main shareholder, and sits on the boards of the Abu Dhabi Investment Council, Abu Dhabi National Oil Company for Distribution and International Petroleum Investment Company, according to the EIA’s website.
Etisalat has commitments from 17 lenders to provide about 6 billion euros of loans to fund the acquisition, according to three people with knowledge of the matter. The company plans to sign the financing this month, and may decide to reduce the size of the facility to reflect the lower cost of the purchase, the people said.
The carrier has a consolidated cash balance of 11.9 billion dirhams ($3.2 billion), an October statement showed.
Maroc Telecom’s nine-month revenue fell 4.7 percent to 21.5 billion dirhams from a year earlier because of lower earnings in its home market and intensifying competition.
$250 Billion
The acquisition is subject to conditions including shareholders’ agreement with Morocco as well as competition and regulatory approvals, Etisalat said in its statement.
Globally, more than $250 billion in deals for the telecommunications industry have been announced this year, according to data compiled by Bloomberg. Today, Czech billionaire Petr Kellner’s PPF Group agreed to buy a controlling stake in the country’s biggest phone company from Telefonica SA (TEF) for about $3.4 billion.
With the sale of Maroc Telecom — a few months after divesting a stake in video-game maker Activision Blizzard Inc. (ATVI) and weeks after resolving a legal battle with Lagardere SA over Canal Plus — Vivendi gets cash to help repay debt and edges a step closer to refocusing business on media by narrowing down its telecommunications investments.
Bowing to investor pressure to overhaul its structure, Vivendi is conducting a study to separate its French mobile-phone unit SFR as it assembles the remainder of its businesses into a new international media group based in France.
Vivendi (VIV) plans to decide by early next year how to allocate its cash from the deals, as well as how to split off SFR from the rest of the businesses and who will lead the future media group. Vivendi also owns record label Universal Music Group and Brazilian Internet unit GVT.
Moelis & Co. is advising the Emirates Investment Authority on the transaction. BNP Paribas SA (BNP) is Etisalat’s adviser, while Lazard Ltd. (LAZ) and Credit Agricole SA (ACA) are working with Vivendi.
