Batelco justifies CWC deal price
Manama, December 5, 2012
Bahrain-based Batelco Group has justified the acquisition price agreed by it for Cable & Wireless Communications’ Monaco and Islands (CWC M&I) Division assets.
In a statement the telecom company said it was responding to speculation and comments from some analysts about the valuation of the CWC M&I assets.
Analysts have been receiving financial reports from CWC about M&I results on a quarterly basis, which are publicly available. However, these results include: a) management fees paid to CWC; and b) Losses from various business operations not being sold to Batelco, the statement said.
These two categories may not be incorporated in the published results of the M&I operating companies over the last 12 months, it said.
Batelco will receive management fees (shown as an expense to M&I companies) and will not be negatively impacted by any loss making activities not associated with the purchase of the assets under its agreement with CWC, the statement said.
“As a result, EBITDA and net free operating cashflow, are higher for the assets Batelco has acquired, compared to previously published results,” it said.
“Based on actual cashflows and EBITDA results for the last 12 months and allowing for factors not adversely impacting the P&L of the acquired operating companies, Batelco confirms that the acquired Operating Companies have a higher profitability than previously reported. In this light, the Group has therefore agreed to pay: a) 5.6 x EBITDA for the acquisition of the Islands ($580 million) , and b) 6.2 x EBITDA for CWC M&I portfolio ($1,025 million) , based on successful completion of both Steps 1 and 2,” it said.
Batelco’s analysis of the acquisition price has been communicated to CWC.
Additionally, based on analysis from Citigroup, precedent deals for assets similar to those being acquired were transacted at average multiples higher than that being paid by Batelco, it said.
Batelco further noted that based on analysis from its advisors that assets with superior cash flow characteristics merit a premium to a firm value / EBITDA multiple or alternatively rely on a cash flow based valuation metric, the statement said. – TradeArabia News Service
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