MegaFon announced the redemption of all outstanding shares for $ 1.26 billion and subsequent delisting from the London Stock Exchange (LSE). The operator's offer aroused interest: its quotes on the LSE grew by 6.6%, and on the Moscow stock exchange - by 16%. This is a good way for minority shareholders, considering the operator's plans to increase the investment program, including the implementation of the requirements of the "law Yarovoi", analysts believe.
"MegaFon" yesterday announced the launch of a share buyback program, which was approved by the company's board of directors on Sunday, July 15. According to the operator, its subsidiary MegaFon Investments Cyprus Limited (MICL) is ready to purchase from July 16 to August 22 up to 128.95 million (20.8%) of common shares and global depositary receipts (GDRs) at a price of $ 9.75 per share or GDR. Thus, the operator intends to buy out all the shares in free float. The offer does not apply to securities owned by USM Holdings and Gazprombank, as well as treasury shares. The buyout price implies a premium of 8.3% ($ 0.75) to the value of MegaFon GDRs at the close of LSE trades on July 13 and a premium of 20.3% ($ 1.64) to the closing price of the Moscow Stock Exchange on the same day.
The status of the public company is no longer included in MegaFon's strategic priorities, the board of directors of the operator decided, while also approving the cancellation of the GDR listing on the LSE, that is, the actual withdrawal from the stock exchange, at which the company held an IPO in 2012. After the completion of the buyout, the company will also consider delisting from the Moscow Stock Exchange: given the complexity and potential costs, it has so far been decided not to initiate it. Nevertheless, after the buyout, MegaFon's ordinary shares will be transferred from the first listing level (the highest quotation list) to the third, the company warned. Yesterday, following the results of trades on LSE, quotes of "MegaFon" rose by 6.6%, and on the Moscow stock exchange - by 16%. Capitalization of MegaFon on the LSE was at the level of $ 5.9 billion.
"We see a great interest in the proposal, investors specify the terms and dates of settlements," Gevorg Vermishyan, the executive director of MegaFon, told Kommersant. According to him, financing for the repurchase of shares will be provided by free cash flow, including the forecasted, and borrowed funds. "Equity financing from USM or Gazprombank is not planned to attract. Perhaps Gazprombank will provide a credit line, but if such a loan is received, it will be provided at market rates and on market terms, "Mr. Vermishyan noted.
"MegaFon" explains the reasons for delisting by the fact that the development of the operator may require expanding partnerships with state corporations, high-risk transactions, investments in infrastructure with a lower level of return, increased debt burden and a greater need for cash, which may lead to a refusal to pay dividends. This "will definitely create significant additional risks for minority shareholders," notes Gevorg Vermishyan. At the end of June, the shareholders of MegaFon decided not to declare and not pay dividends for 2017.
As the analyst of Raiffeisenbank Sergey Libin says, $ 1.257 billion will be required to repurchase shares to MegaFon, but the operator should receive $ 250 million as a result of the creation of a joint venture with Gazprombank and Rostek, in which the operator will contribute part of its stake in Mail.ru Group, so its debt burden will grow by only about $ 1 billion. As a result, the ratio of net debt and OIBDA of MegaFon will change from 1.9 to 2.4, which implies additional payments on loans of about 5 billion rubles. per year, the document says. Considering the capital costs for storing data on the "Yarovoi law" in the amount of 35-40 billion rubles. for five years, free cash flow will be insignificant, and dividends would be rather minimal, explains Mr. Libin. In his opinion, the majority of minority shareholders should accept an offer.
The transition of MegaFon to a private status will not lead to significant changes in the telecommunications market, say its participants, interviewed by Kommersant. "I do not think that this will affect the market significantly. And certainly will not affect MTS's strategy in any way, "said Artem Zasursky, Vice-President for Strategy of Sistema (the main shareholder of MTS). Vympelcom declined to comment.