The Slovenia Times

SSH Accepts Offer by Cinven, But Deal for Telekom Slovenije Still Not Final


The supervisory board of Slovenian Sovereign Holding (SSH) accepted the offer by UK private equity fund Cinven for the purchase of Telekom Slovenije on Wednesday, but a new twist in the ongoing saga about privatisation of the telecoms incumbent means that a deal is still out of reach.

Meeting to give their final nod to the sale of a 75% stake in Telekom Slovenije, the supervisors were faced by an amendment to the offer by Cinven regarding recent acquisitions and mergers by Telekom Slovenije. They decided to accept the 20 May offer by the fund, while ignoring the amendments.

Announcing the decision, SSH chairman Matej Pirc said the decision represented an important step to selling the state-owned telecommunications provider, while falling short of a full-fledged confirmation of a deal.

The sticking point is the amendment which the UK fund submitted yesterday - news of this emerged ahead of today's session of the SSH supervisory board - that in its words "address the delays in the anti-trust approval processes and completions of the Debitel acquisition and Macedonian operations merger".

Slovenian mobile service provider Debitel was acquired by Telekom Slovenije earlier in the year in a deal that is still pending regulatory approval. Meanwhile, the telco is in the process of merging its Macedonian subsidiary with that of Telekom Austria in line with a deal from October 2014 that is pending approval from Macedonian authorities. The Slovenian company will hold a 45% stake in the joint venture.

While Cinven said the economic terms of the offer are unaltered - the fund has reportedly offered EUR 130 per share for Telekom with a part of the proceeds conditional on performance and the outcome of pending anti-trust lawsuits against the telco - the SSH rejected the amendments today.

This means that the SSH management will now have to coordinate the final wording of the sales contract with Cinven to include its latest conditions before returning the decision to the supervisory board.

"The decision on signing the sales contract is now in the hands of the potential buyer, while the SSH management will work to harmonise the wording of the contract," said Pirc, who expects that the supervisory board will be able to take a final decision next week.

Chief supervisors Samo Lozej said that he was confident the SSH management "will do everything in its power to secure the best conditions given the circumstances".

Cinven said it would not comment on the decision by the SSH supervisory board until it receives official word from the custodian of state assets.

Prime Minister Miro Cerar, who had urged the supervisors to confirm the sale earlier in the day, issued a statement after news of the decision saying that the state will now have to await a response from Cinven.

It is the latest twist in the protracted second attempt to privatise the telco which has been accompanied by extensive political hoopla in Slovenia due to the economic importance of the telecommunications market leader.

Supporters and opponents of privatisation have clashed on what the sale will bring for consumers and, more broadly, for the Slovenian economy. The former have maintained that the sale will provide for better governance, but the latter argue that the state is selling Slovenia's best companies cheaply under duress from international markets.

Reaction was swift to Wednesday's decision, with both camps expressing satisfaction that SSH had "acted wisely" in not accepting the amendments.

Leader of the coalition Social Democrats (SD), who have been isolated in the government in their opposition to the sale, said the decision was "Solomonic", while expressing hope that the sale may still be halted. Dejan Židan was also critical of Cerar's decision to issue today's call to the supervisors, saying that this amounted to pressure to confirm the sale.

Meanwhile, leader of the coalition Pensioners' Party (DeSUS) said he was happy the SSH had taken ownership of the sale process, after trying to pass the decision to the government last week. Erjavec said it was wise that the supervisors had decided to hold off a final decision until receiving clarification on the offer by Cinven.

Regardless of the latest hiccup in the final confirmation of the sale, investment analyst Matej Tomažin said that today's decision means that the chances of Telekom Slovenije being sold are high. "The process appears to have been given a green light, although the bidder will now have to have a final say after amending its offer."

The sale of the 72.75% state stake plus another 3% held by private investors was launched with a call for expressions of interest on 2 April 2014. The process resulted in Cinven emerging as the sole binding bidder a year later.

Negotiations with the UK private equity fund have seen it improve its offer to value the whole Telekom Slovenije group at around EUR 850m if all conditions are fulfilled. Media reports said the offer would include an immediate payment of EUR 110 per share plus another EUR 15 depending on the outcome of the anti-trust action and EUR 5 on performance.

Telekom Slovenije currently faces outstanding anti-trust lawsuits from its competitors of around EUR 300m, although in previous judgements the plaintiffs have been rewarded only a small share of the sought damages, if any. It also faces a possible fine from the Competition Protection Agency for alleged anti-trust practices from 2008 to 2010 related to a mobile telephony package for youths.


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