SALE TALKS
Investment bank retained to advise; Chinese telecoms interested
Digicel has retained Citigroup, a multinational investment bank and financial services corporation, to advise the telecom company on a possible sale of its Pacific operations, the Irish Times reported.
The move follows a number of uninvited approaches for the least-indebted part of Irish businessman Denis O’Brien’s telecoms group.
The unit could be worth about €163 billion (FJ$409 b) according to industry sources, based off the division’s earnings before interest, tax, depreciation and amortisation (ebitda) of €230 m ( FJ$577 m) for year to the end of March.
Telecommunication companies are currently valued at an average of 8-10 times ebitda.
A spokesman for Digicel confirmed that it has “received approaches from a number of parties in respect of its Pacific operations”.
Digicel Fiji said the comments in the Irish Times story by Digicel’s head office in Ireland, was sufficient.
Digicel in Ireland said talks with the parties, were confidential.
Several interests
The Australian Financial Review reported last week that several Chinese entities, including China Mobile, Huawei and ZTE, were considering buying Digicel’s Pacific unit.
It included the company’s business in Papua New Guinea, one of its top three markets, as well as Fiji, Samoa, Vanuatu Tonga and Nauru.
A liquidation analysis by KPMG for Digicel before the group started negotiations with bondholders on a distressed-debt restructuring deal earlier this year indicated that Digicel Pacific was the only part of the empire that would raise money in a wind-up scenario.
The analysis concluded that the unit’s assets could generate up to €615.2 m (FJ$1544 m) in a firesale.
Bondholders subsequently agreed to write off €1.6b
(FJ$4.01 billion) of what they are owed, in order to avoid larger losses in a liquidation scenario.
This brought the group’s net debt down to a more sustainable €5.3b
(FJ$13.3 b).
The deal involved the debt investors swapping their notes for bonds of a lesser value.
The KPMG report showed that Digicel Pacific’s own debt stood at €87.5m (FJ$219 m).
However, the unit was subsequently used as a guarantor for some of the notes issued by a holding company at the top of the group as part of the bond-swap transaction.
Reduce debt burden
A potential sale of the Digicel Pacific unit would most likely be used to further reduce the group’s debt burden and provide money for additional investment.
Digicel has spent more than €6 b ( FJ$15.06 b) building telecoms networks and businesses across 32 markets in the Caribbean, Central America and Pacific over the past two decades.
Mr O’Brien took at least €1.9 b (FJ$4.76 b) of disclosed dividends out of the group between 2007 and 2015.
The Australian Financial Review said the Australian government may offer financial support on national security grounds – possibly by way of loans or loan guarantees – to Australian bidders eying the unit, in order to thwart Chinese efforts to buy the business at a time of heightened geopolitical strain between both states.
Source: Irish Times, Australian Financial Review, Fiji Sun