A rumored bid by Marfin Popular Bank to buy the Public Power Corporation’s (PPC) telecom subsidiary Tellas is seen by market experts as a move that is actually in support of Egyptian communications magnate Naguib Sawiris’s bid for the same company.
The Sawiris bid for Tellas is valued at nearly 200 million euros, while PPC seems unwilling to settle for a price lower than 400 million euros.
Marfin’s bid occupies the middle ground between PPC’s anticipated sale proceeds and Sawiris’s bid. Marfin is said to be ready to offer 300 million euros for Tellas, and this is seen by some circles as a means of exerting pressure on the Egyptian businessman to raise his own offer. Sawiris, on the basis of an agreement with PPC, has the right of first refusal.
Marfin’s actual interest is focused on cellular operator Wind Hellas, in which it aspires to obtain a stake before that company is listed.
Wind in debt
Meanwhile, Wind Hellas is in need of fresh capital to balance its excessive borrowing of approximately 3 billion euros, which continues to gnaw away at its operating profit.
Consequently, a share capital increase is regarded as imperative for the firm if it wishes to lower borrowing and acquire a stronger equity basis.
Wind Hellas’s equity is currently at less than 50 million euros while Marfin will be looking for opportunities to invest its 5.2 billion euro share capital increase.
But this plan is neither simple nor certain. Market observers believe that a lot of things could go wrong. For instance, PPC may stubbornly insist on pricing the sale deal at 400 million euros based on Tellas’s valuation. In addition, during the tender process by PPC to sell its own stake, a third interested buyer may emerge, which would very likely complicate things even further.
It follows that moves by Sawiris are being made on the pretext that no other player, either domestic or foreign, would offer a price for Tellas in excess of 300 million euros. Besides, Sawiris’s team believes that PPC is wise enough not to let Tellas collapse.
If the value of the company is around 300 million euros – a mean value between the two sides – then PPC may sell the company and make a profit of 70-80 million euros, allowing for Tellas’s liabilities of 150 million euros. Such a profit could be considered appropriate, given that it equals PPC’s initial investment, and allows for a small net profit – which would in turn allow both PPC administration and the government to strengthen their arguments in favor of selling the subsidiary, in the event of criticism over the price.
Alternatively, PPC may have to continue financing Tellas to make its investment viable. Nevertheless, this option would be quite costly, considering that the parent firm’s financial flows do not really permit such an expenditure. In addition, PPC has a number of more critical priorities which are more urgent than the Tellas issue. Ultimately, this would certainly facilitate Sawiris’s plans.
As far as the timing of the deal is concerned, Finance Minister Giorgos Alogoskoufis is not believed to oppose (as also happened with OTE) its completion before forthcoming national elections, whenever they are held, provided of course that the deal is profitable for PPC.
(Kathimerini, 05/06/2007)