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Orascom Telecom Opposes Mobinil Deal Approval
Published Dec 13, 2009
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Egypt's Orascom Telecom said it rejected regulator support for a France Telecom (FT) bid for shared asset Mobinil, which would net Orascom more than $1.6 billion but see it exit its home turf.
Orascom's London-listed stock jumped on Friday after Egypt's regulator approved a fresh FT bid for Mobinil, Egypt's largest mobile firm by subscribers. Mobinil and Orascom stock does not trade in Egypt on a Friday.
The regulator said late on Thursday it had approved an FT unit's offer to pay LE 245 ($44.69) for each freely traded share in Mobinil.
"The company received this statement with a great deal of surprise and confusion because it contradicts the regulator's three previous refusals," Orascom said in a statement.
"This represents a flagrant violation of the capital markets law and its executive charter," it added.
An international arbitration court had earlier ruled that the French firm should pay LE 273 per share in a holding company the two firms jointly own which controls Mobinil.
That ruling was never implemented, as the firms fought over what it meant for the free shares. The regulator's approval reversed three earlier rejections of France Telecom bids, which were priced at LE 200, LE 239 and LE 230.
In rejecting the earlier bids the regulator had stated the price did not ensure equality among shareholders, but it did not raise such objections in Thursday's statement.
France Telecom has argued that shares in the holding company are more valuable than traded shares because it had received dividends it had not distributed and charged management fees.
Orascom said it was studying its legal options but had not made a decision yet.
"We are studying all legal aspects relating to the latest developments and will announce a final position later," it said.
Orascom's global depositary receipts were trading 5.8 percent higher at $27.11 by 1300 GMT on Friday
Mobinil shares gained 4.7 percent to LE 208.30 in late trading on Thursday that traders ascribed to rumors about an impending deal.
Analysts said Thursday's ruling, while surprising for Orascom, could help it overcome recent problems including a larger-than-expected tax bill for its Algerian operations and regulatory obstacles to entering the Canadian market.
"They may have to accept this offer this time because of the cash position of the company right now and the circumstances for (Algerian unit) Djezzy ... this might solve some problems for them," said telecom analyst Ahmed Adel from Naeem brokerage.
"I think at this stage they have to look forward for a merger or acquisition with Wind or any other emerging market focused telecom company," he added.
Wind, which runs telecom firms in Italy and Greece, and Orascom are both owned by Italy-based Weather Investments, which is majority-owned by Orascom chairman Naguib Sawiris.
Wind announced a €750 million ($1.11 billion) bond issue due in 2017 on Thursday that it said could be used in part to "enhance the overall liquidity position of the group" in reference to Weather.
Orascom owns a roughly 35 percent stake in Mobinil, split between its minority stake in the holding company and a 20 percent direct stake.
If it sells the holding company stake at LE 273 per share and the other shares at LE 245 it would make some $1.6 billion.
Investment bank Morgan Stanley upgraded its position on Mobinil to "equal weight" from "underweight" following the approval, calling the decision "a clear positive surprise for Mobinil" that implied an 18 percent upside on the listed shares.
In a note to clients it said the deal added $2 of value to Orascom GDRs if the firm sold all its Mobinil holdings.
"But, if Orascom goes ahead and sells its stake it would reduce market concerns over funding into 2010 — arising from the current tax dispute in Algeria — and, therefore, the impact on the stock would be greater than just $2," it said.
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