Sources inform "Globes" that a recommendation by Entropy Consultants to reject Patrick Drahi's offer to purchase to HOT Telecommunication Systems Ltd. (TASE: HOT) shareholders led Drahi to improve his offer once more. HOT announced today that the price Drahi is offering for the public's holdings in the company (30.76%) will rise by 8% from NIS 38 per share to NIS 41. The new price values HOT at NIS 2.98 billion, so that Drahi will pay NIS 918 million for all of the public's holdings.
Because of the change in price, the shareholders meeting to approve the offer to purchase has been postponed from Sunday to Wednesday. The assessment on the capital market is that at the new price the chances that the offer will be accepted are high. The reason for that is that Entropy's paper, which "Globes " has obtained, states that a fair price is NIS 40-42 per share.
Entropy, which advises investment institutions on how to vote in shareholders meetings, recommended rejecting the previous offer on the grounds that it implied a multiple of 4.3 on HOT's EBITDA, while the average for other telecommunications companies is 4.5.
In fact, Entropy believes that HOT should be valued according to a multiple nearer to that of Bezeq Israeli Telecommunication Co. Ltd. (TASE: BEZQ), but since HOT is expected to carry out larger capital investment than its competitors and therefore be less profitable, because of its goal of penetrating the wireless telephony market with aggressive marketing, it decided to calculate the target price on the basis of the average multiple of 4.5.
Drahi's offer is in effect a proposal to merge HOT with Cool Holdings Ltd, which he controls and via which he holds 69.24% of HOT, and delist it.
Earlier this week, Drahi overcame another obstacle to his plans in the shape of objections by Cool Holdings bondholders, on the grounds that the HOT shares that stand as security for the debt owed to them will become illiquid. Drahi reached a compromise with the bondholders whereby he will pay them NIS 55 million compensation in return for early repayment of the bonds. The bondholders in Cool Holdings are Migdal Insurance and Financial Holdings Ltd. (TASE: MGDL), Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS), Excellence Investments Ltd. (TASE: EXCE), The Phoenix Holdings Ltd. (TASE: PHOE1;PHOE5), Mizrahi Tefahot Bank (TASE:MZTF), and Goldman Sachs.
Published by Globes [online], Israel business news - www.globes-online.com - on November 1, 2012
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