Three of Top 10 M&A deals in Ukraine in 2011 were financed with foreign capitalThree of Top 10 Ukrainian M&A deals in 2011, stated by KyivPost newspaper were financed by foreign capital. These are: Ukrtelecom, Inkerman, VAB Bank.
Ukrtelecom
It is hard to consider this year’s privatization of a 93 percent stake in fixed-line telephone monopoly Ukrtelecom as a classical M&A transaction. For one, it was a privatization deal. Secondly, controversial conditions of the privatization auction excluded many top investors from taking part. As a result, only one bidder took part.
And in the end, the market is convinced that the new owner, Austria’s EPIC, represents domestic business interests as a front. Nevertheless, Ukrtelecom was acquired by the group for $1.3 billion, making it the second largest privatization acquisition in Ukraine’s history after the 2005 $4.8 billion purchase Kryvorizhstal by Mittal Steel (Today ArcelorMittal).
Ukrtelecom’s privatization also deserves attention because the company owns Ukraine’s sole license for 3G telecommunications.
Inkerman
In January, Horizon Capital, a private equity fund, and Hartwall Capital of Finland, bought a stake in Crimea-based Inkerman, one of Ukraine’s largest wine producers. The sale price was not disclosed.
VAB Bank
In January, TBIF Financial Services, a Dutch company which represents the interests of Israeli investors, sold an 84 percent stake in Ukraine’s VAB Bank to an unknown group of foreign investors for $69 million.
According to January note to investors produced by Renaissance Capital, the new owners were represented by Troika Dialog, an investment bank that is active in Russia. The sale comes after VAB bank doubled its losses in 2010 to $78 million.
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Ukrtelecom Introduces Four Tariff Plans “Business Internet” For Corporate Subscribers To Mobile InternetUkrtelecom, the largest telecommunication company in Ukraine, has introduced four tariff plans "Business Internet" for corporate subscribers to mobile Internet from March 15.
In the "Business Internet 1" tariff plan the company provides corporate subscribers with 1,024 Mb of Internet traffic within the network of Ukrtelecom and 40 Mb of traffic in the national roaming for UAH 40 a month.
In the "Business Internet 3" tariff plan the company provides corporate subscribers with 3,072 Mb of Internet traffic within the network of Ukrtelecom and 70 Mb of traffic in the national roaming for UAH 70 a month.
In the "Business Internet 10" tariff plan the company provides corporate subscribers with 10,240 Mb of Internet traffic within the network of Ukrtelecom and 5,120 Mb of traffic in the national roaming for UAH 120 a month.
Also, the company offers the Business Internet Premium tariff plan which includes unlimited Internet traffic within the network of Ukrtelecom and 10,240 Mb of traffic in the national roaming for UAH 480 a month.
As Ukrainian News earlier reported, Ukrtelecom ended 2010 with losses of UAH 258.757 million, having reduced net revenues by UAH 115.452 million or 1.68% to UAH 6,749.304 million compared with 2009.
The State Property Fund of Ukraine on March 11 sold 92.79% in Ukrtelecom to the ESU Company (Kyiv), a subsidiary of the Austrian Investment-Financial Consortium EPIC, for UAH 10.575 billion.
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Property Fund Calls 5 Austrians Ultimate Owners Of UkrtelecomThe State Property Fund of Ukraine calls five Austrian nationals, three of whom are EPIC managing partners, the ultimate owners of ESU (Kyiv; subsidiary of the European Privatisation and Investment Corporation, EPIC, Austria), which on March 11 acquired 92.79% of shares in Ukrtelecom, Ukraine's biggest telecommunication company, Property Fund Chairman, Oleksandr Riabchenko, has announced when speaking to the Verkhovna Rada.
In his words, EPIC managing partner Peter Goldscheider holds 24% of the shares, Brigitte Goldscheider 23.5%, EPIC managing partner Gustav Wurmboeck 24%, Marina Wurmboeck 23.5%, and Franz Lanschutzer, another managing partner, 5%.
He notes that ESU, when submitting documents for the privatisation, provided information about its owners.
"The buyer (ESU) is owned by a Cyprus-based company [EPIC Telecom Invest Ltd], the Cyprian company belongs to the Austrian company [EPIC], and the Austrian company is owned by five Austrian citizens," he said.
Before, EPIC said that EPIC Goldscheider & Wurmbock, Vienna (EPIC), the exclusive owner of EPIC Advisors Limited (EAL), which through its subsidiary, EAL, is the sole owner of EPIC Services Ukraine (ESU), had made a decision to optimise the holding structure, having adapted it for the privatisation of Ukrtelecom by transferring rights to direct ownership of ESU to EPIC Telecom Invest Ltd (ETI).
EAL is 100-percent owned by ETI.
As Ukrainian News earlier reported, the State Property Fund on March 11 sold 92.79% of shares in Ukrtelecom to ESU for UAH 10.575 billion.
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Experts: Investment Priority Of Ukrtelecom’s New Owner Is In Broadband InternetExperts believe that the investment priority of the new owner of the Ukrtelecom telecommunications company is broadband Internet services.
"I think that (investments will be directed) primarily toward development of the Internet. This is the segment that is developing most dynamically. In addition, computer communication requires less investment than mobile communications," said Viacheslav Ivanyshyn, an analyst with the TASK investment group.
At the same time, Ivanyshyn believes that there will be no fundamental change in Ukrtelecom following its acquisition and that the company will remain unprofitable.
According to Ivanyshyn, the biggest problem of Ukrtelecom is that it has too many employees, but he does not expect a significant reduction in the number of its employees.
Yehor Samusenko, an analyst with the Concorde Capital investment company, believes that one of the first steps of the new owner of Ukrtelecom will be a 30-40% staff reduction and estimates the payouts related to the staff reduction at approximately UAH 900 million.
Samusenko also shares the view that the main focus of investments will be Internet access services.
Regarding Ukrtelecom's UMTS (3G) mobile communications network, Samusenko said that the following development scenario was possible: the participants on the market of mobile communications services could agree on joint development of this network, regardless of whether they obtain 3G licenses this year.
Volodymyr Klymenko, the director of the Sokrat investment and banking group, also believes that the investments of the new owner of Ukrtelecom will focus on development of broadband internet and third-generation mobile communications services.
"In our opinion, investments could primarily be made in development of promising area of business, in particular 3G and Internet services," Klymenko said.
According to Klymenko, the new owner will focus on increasing the profitability of Ukrtelecom and restructuring the company.
According to him, the restructuring will involve, in particular, changing and reducing the company's management structure, as well as separation of its non-core assets with a possible subsequent sale.
As Ukrainian News earlier reported, the State Property Fund and the ESU company (Kyiv) signed an agreement on sale of 92.79% of the shares in the Ukrtelecom telecommunications company for UAH 10.575 billion on March 11.
ESU is a subsidiary of the EPIC investment and financial consortium (Austria).
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Experts Expect Ukrtelecom’s IPO In 2014-2016Experts expects Initial Public Offering of Ukrtelecom, the largest telecommunication company in Ukraine, on foreign exchanges in the 2014-2016 period.
"If the company takes the path of restructuring, which is probable, IPO would be rational in three years," said Volodymyr Klymenko, director of the investment-banking department of the Socrat investment group.
Yehor Samusenko, an analyst of the Concorde Capital investment company, also expects IPO of Ukrtelecom no sooner than in three years. He noted that IPO is an alternative to the sale of the company to a strategic investor.
Viacheslav Ivanishyn, an analyst of the TASK Investment Group, sees as equal two options: IPO of Ukrtelecom (in three or five years) and sale of the company to a strategic investor.
Ivanishyn added that one of the companies that could not take part in the tender for restrictions of the privatization terms (such as Deutsche Telekom) can show interest in purchasing Ukrtelecom.
As Ukrainian News reported, the State Property Fund of Ukraine on March 11 sold 92.79% in Ukrtelecom to the ESU Company (Kyiv), a subsidiary of the Austrian Investment-Financial Consortium EPIC, for UAH 10.575 billion.
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EPIC continues to hold 100% of ESUEPIC Goldscheider & Wurmböck, Vienna (EPIC), the exclusive owner of EPIC Advisors Limited (EAL) and via EAL also the single owner of EPIC Services Ukraine (ESU), has resolved to optimize its holding structure regarding the potential privatization of Ukrtelecom by placing EPIC Telecom Invest Ltd (ETI) as direct owner of ESU. ETI is 100% owned by EAL.
Therefore, EPIC remains 100% beneficial owner of ESU.
Peter Goldscheider, Managing Partner of EPIC: “It is rather amusing how such a non-event can stir up attention”.
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Stock Market Players Notice Insignificant Influence Of Sale Of 92.8% Of Ukrtelecom On Company QuotationsStock market players notice insignificant influence of the sale by the State Property Fund of 92.8% of shares in Ukrtelecom, Ukraine's biggest telecommunication company, to ESU (Kyiv; subsidiary of the European Privatisation and Investment Corporation, EPIC, Austria) on Ukrtelecom quotations.
"The trading in Ukrtelecom shares opened at 57 kopecks a share. The peak was at the level of 58.8 at about 11:20. And then Ukrtelecom slid down abruptly and by noon reached 56.6 kopecks a share. It now trades in this range," said Andrii Tarasenko, the head of the investment consulting department at Upras Capital.
In his opinion, they expect no split-off or separation of some of the company assets after its privatisation, as this is not allowed by the privatisation conditions.
Viacheslav Ivanyshyn, an analyst at the TASK Investing Group, says that a slight growth of Ukrtelecom quotations was observed right next to the announcement of the sale of the 92.8-percent stake in the company, although soon the upward movement changed for a fall in the price of the stock.
"Was a little growth upwards, and then Ukrtelecom shares 'fell in' again. This means the stock market players don't believe in further runup of the company shares," he said.
Ivanyshyn also takes as unlikely split-off of the telecom company after the sale of 92.8% of shares in it.
Mykhailo Roiko, the president of equity firms at Amadeus Asset Management (Kyiv), has stressed that the dynamics of the cost of Ukrtelecom shares coincide with the general dynamics of the market, which testified to insignificant influence of the sale 92.8% of shares in the company on quotations of its securities.
As Ukrainian News earlier reported, the State Property Fund of Ukraine on March 11 sold 92.79% of shares in Ukrtelecom to ESU for UAH 10.575 billion.
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Tymoshenko Calls Understated Value Of Ukrtelecom SaleYulia Tymoshenko, former prime minister and current leader of the Batkivschyna All-Ukrainian Association party calls understated the price at which the State Property Fund sold 92.79% of shares in Ukrtelecom.
"In my estimation the country lost at least three billion or four billion dollars on the shadow privatisation of Ukrtelecom. I think that Ukrtelecom, which has been sold today at the starting price, was sold by arrangement and at a price much lower than it really costs," Tymoshenko said.
In Tymoshenko's opinion, the bargain was of purely corrupt nature.
"Today, on the landmark day of the government anniversary, they have surrendered Ukrtelecom furthermore. Today the people of Ukraine have no Ukrtelecom," she added.
The Batkivschyna leader has stressed, after the overturning of the ruling authorities and coming to power of new ones, what was illegally taken away from the people and returned to the state.
As Ukrainian News earlier reported, the State Property Fund of Ukraine sold 92.79% of shares in Ukrtelecom, Ukraine's biggest telecommunication company, to ESU (Kyiv; subsidiary of the European Privatisation and Investment Corporation, EPIC, Austria) for UAH 10.575 billion.
ESU in February officially affirmed its agreement to acquire 92.79% of the shares in Ukrtelecom for UAH 10.575 billion, the price the State Property Fund quoted basing on results of an expert appraisal.
ESU was the only bidder for the acquisition of the 92.8-percent stake in Ukrtelecom, which was the reason for the Fund to apply the procedure of appraising the value of the shares in the company.
The expert appraisal was UAH 75 million higher that the starting price set by the Property Fund for the privatisation competition, which had been scheduled for December 28, 2010.
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Property Fund Sells 92.8% Of Ukrtelecom To Austria’s EPIC Subsidiary For UAH 10.6 BillionThe State Property Fund of Ukraine sold 92.79% of shares in Ukrtelecom, Ukraine's biggest telecommunication company, to ESU (Kyiv; subsidiary of the European Privatisation and Investment Corporation, EPIC, Austria) for UAH 10.575 billion.
From the Property Fund side it was signed by its Chairman, Oleksandr Riabchenko, from the EPIC side by Wolfgang Heritsch, authorised by the ESU subsidiary company.
As to Riabchenko, the buyer has to pay the total sum in sixty days (half in thirty days and the other half over the next thirty).
He says that Ukrtelecom has USD 160 million and UAH 3.7 billion of debt liabilities as of March 11.
The Property Fund Chairman underlines, one of the investment obligations of the new owner of the company is building a special communication system within two years (approximate investments in this system make about USD 200 million).
On the whole Riabchenko is positive about the sale of the operator, noting that if Ukrtelecom were sold a year later its cost would be lower.
As Ukrainian News earlier reported, ESU in February officially affirmed its agreement to acquire 92.79% of the shares in Ukrtelecom for UAH 10.575 billion, the price the State Property Fund quoted basing on results of an expert appraisal.
ESU was the only bidder for the acquisition of the 92.8-percent stake in Ukrtelecom, which was the reason for the Fund to apply the procedure of appraising the value of the shares in the company.
The expert appraisal was UAH 75 million higher that the starting price set by the Property Fund for the privatisation competition, which had been scheduled for December 28, 2010.
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Experts Consider Reshuffle In Ukrtelecom Management UnlikelyA new owner will unlikely make reshuffles in Ukrtelecom management, according to experts.
"Only a shareholder can say whether Dzekon (Hrigoriy Dzekon, CEO of Ukrtelecom - HiTech.Expert) will be dismissed. I should note that there isn't any appropriate candidate in Ukraine to replace Dzekon," Yehor Samusenko, Concorde Capital analyst, said.
Yet, the company may attract several top executives from abroad, he noted.
The same opinion was expressed by Viacheslav Ivanyshyn, analyst for the TASK investment group. "Ukrtelecom management will unlikely be replaced because the Austrian EPIC is associated with the incumbent management," he noted.
Ivanyshyn admits that the new owner can enhance management by that in charge of investment and financial affairs.
However, Volodymyr Klymenko, director of the investment banking department of the Sokrat investment group, thinks that the new owner will radically change the company's management.
Heorhii Dzekon, Ukrtelecom board chairman, may either stay in his office or will be offered another high position during a year after the company's privatization, Klymenko predicts.
As Ukrainian News reported, the State Property Fund of Ukraine on March 11 sold 92.79% in Ukrtelecom to the ESU Company (Kyiv), a subsidiary of the Austrian Investment-Financial Consortium EPIC, for UAH 10.575 billion.
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