Now it's official: Scailex Corp. ltd. (TASE: SCIX; Pink Sheets:SCIXF), controlled by Ilan Ben-Dov, will buy control of wireless carrier Partner Communications (Nasdaq: PTNR; TASE: PTNR; LSE:PCCD) from Hutchison Telecommunications International Ltd. (NYSE: HTX; HKSE: 2332). Scailex will pay NIS 5.29 billion for Hutchison's 51% stake. This is equivalent to NIS 67 ($17.50) per share, repesenting a small premium of 1.7% on the market price. The transaction is due to be closed within three months.
Partner operates a mobile telephony network in Israel under the Orange brand.
It was expected that Ben-Dov would emerge as the buyer in the bidding process. Earlier this morning, trading in Hutchison shares was suspended on the Hong Kong Stock Exchange pending the announcement of the deal.
The deal will considerably improve Hutchison's financials, after large losses in its real estate business around the world and losses on its telecommunications business as well. The other main bidder for Hutchison's Partner holding was Shaul Elovitch's Eurocom.
Scailex had NIS 563.1 million in cash at the end of March. The company has the Israel franchise to import Samsung Electronics Co. Ltd. (KSX: 5930) cellular telephones, a business acquired from its parent company, Suny Electronics Ltd. (TASE: SUNY), last year. Suny owns 86.5% of Scailex.
Suny's other main holding is an indirect 58.1% stake in Internet portal Tapuz People Ltd. (TASE:TPUZ) through wholly-owned subsidiary Suny.com.
In the next few days, Ben-Dov is due to release the detailed agreement for buying control of Partner, but it is already clear that he was helped in closing the deal by $300 million that he received as financing from Hutchison itself. Without the assistance offered by Hutchison, it is doubtful whether any of the bidders could have closed a deal.
At present, Ben-Dov stands alone behind the deal, without the backing of any institutions. They will now wait for his approach, since it was not possible to negotiate with the sellers and the institutions at the same time. Ben-Dov's current bankers are Bank Leumi (TASE: LUMI) and Mizrahi Tefahot Bank (TASE:MZTF), but it is not known how much financing he will receive from them. It is estimated that the two banks will lead a consortium of other banks; they are not expected to finance the deal alone. The price at which Ben-Dov is buying the shares represents a problem for the institutions, because they believe that the price is very high. Given the risks in the telecommunications market, the potential for enhancing Partner and extracting added value from it is limited, because the share price is at a peak.
What is certain is that to obtain the financing for the deal, Ben-Dov undertook to carry out a capital reduction at Partner and to draw a dividend of NIS 1-1.5 billion, against which he will raise debt. Since Partner is not highly leveraged in comparison with, for example, Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL), Ben-Dov is not expected to encounter any difficulty with this, although he will need court approval.
On the Tel Aviv Stock Exchange, Partner's share rose 0.4% by mididay to NIS 67.24, after falling 0.7% at the opening. The share closed at $17.21 on Nasdaq yesterday. Suny's share rose 4.7% to NIS 18.80, but Scailex fell 1.2% to NIS 42.
Published by Globes [online], Israel business news - www.globes.co.il - on August 12, 2009
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