US fund wants to acquire 20% of Telekom Serbia and Komercijalna Banka

The former US Secretary John Kerry and American investor Tim Collins quietly visited Serbia this May, to meet with President Aleksandar Vucic and Prime Minister Ana Brnabic.

According to unofficial information available to the Danas daily, Collins’ Ripplewood Advisors investment fund, formerly Ripplewood Holdings, owned by Tim Collins, offered to buy the state’s 20% share in Telekom Serbia and Komercijalna Banka each through the Ministry of Trade, Tourism and Telecommunications. The offer is valid for 120 days and it seems that the authorities are leaning toward accepting it. This could kickstart the privatization of the two perhaps most valuable state companies.

The value of the offer has not been disclosed, but one parameter that could be considered is the price Telekom itself paid to the Greek OTE in 2011 for the buyout of 20% of own shares. Telekom paid EUR 380 at the time, in a much less favourable macroeconomic and international environment that is the case now. The state owns 58.1% of the company, Telekom itself owns 20%, and the rest belongs to small shareholders.

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The state has tried to sell its stake in Telekom twice already, but unsuccessfully, because of the unsatisfactory offers. The first time it tried to sell its share was when the government, with the then PM Mirko Cvetkovic, offered 51% of the shares for sale in 2011 and only to subsequently refuse the offer from Telekom Austria of 1.1 billion euro.

Four years later, the government, with Aleksandar Vucic at its helm, put up for sale 58% of the state’s shares and although it never disclosed the details about this transaction, Vucic stated at a press conference that the share offered for sale amounted to six annual EBITDA (operating profit) which, when applied to the business results from 2014, amounted to 1.3 billion euro. This also showed that the entire company was valued at about 150 million euro less than in 2011.

The state owns 41.75% of the shares in Komercijalna Banka, with other stakeholders including the EBRD (24.4%), the International Finance Corporation, a member of the World Bank (10.15%), the German investment fund Deg (4.6%) and the Swedish fund Svedfund (2.3%). The bank is evaluated at around 300 million euro, though experts say that the stock market price seriously underestimates the bank’s actual value. It should be noted that, under a partnership agreement signed in 2006 with the state, the EBRD and the IFC have the right, if the bank is not privatized, to sell their shares to the state for around 252 million euro. This implies that 20% of the bank’s shares are worth close to 150 million euro, two and a half times more than the stock market value.

As of the publication of this article, neither Komercijalna Banka nor Telekom Srbija has commented on the potential sale.

(Danas, 08.12.2018)



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