The secret plan of Partner's controlling shareholder
Ilan Ben-Dov devises plan to float company's value, increase Partner's leverage to raise value for shareholders
Partner Communications released partial results last month showing tumbling profits with its market cap dropping to NIS 4.7 billion on the Tel-Aviv stock exchange.
Partner's value is the most crucial figure for controlling shareholder Ilan Ben-Dov. Ever since Deutsche and Lazard were named to lead the Partner's sale, the buzz around the deal has subsided leaving Ilan Ben-Dov to formulate three alternative acquisition schemes.
Negotiations, scheduled for mid-March, will be over a reverse triangular merger in which a private equity fund will buy the public's holdings in the company (55%) and about 5% of Ben-Dov's stock, making Partner a private company. According to this scheme, once the deal is completed, the buyer will hold a 60% stake in the company and Ben-Dov will control the remaining 40%; however, the final stake acquired by the buyer will be determined by how much money Ben-Dov will need to repay Scailex's debt. The buyer will take a bridge loan from Deutsche Bank.
Ben-Dov is currently examining the sale of Scailex. Sources on the market say that chances of selling the company for more than NIS 700 million are slim.
25% premium on market cap
According to the acquisition deal, the acquisition of the public holdings in the company will presumably reflect a 25% premium over the company's current market cap – NIS 37-38 per share. The buyer will be required to form a private entity through which it will hold the stock and at a later stage, merge with Partner.
Once Partner becomes private, the buyer will lead a move whereby Partner will raise debt in the amount of hundreds of millions to one billion dollars to distribute to shareholders who will use it to repay the Deutsche Bank loan. Scailex will then repay the loan from Hutchison it got to acquire Partner. Ben Dov holds a 44.5% stake in Partner through Scailex, a subsidiary of Sunny Electronics. Scailex is scheduled to repay its debtholders over NIS 600 million a year in the next two years; in 2014, it scheduled to pay bondholders and Hutchison a total of one and a half billion shekels.
Ben-Dov met with eight investment banks to discuss the deal and eventually chose Deutsche Bank and Lazard which are already working out the deal with Ben-Dov and searching for a business valuation professional to valuate Partner.
At the top of the buyers' list is the Apax Fund managed by Zehavit Cohen who has recently met with Ben-Dov at least once, although the deal is begin handled by a team from Apax Italy. The recommendations of the committee on Israel's economic concentration published Wednesday, considerably impede Apax's prospects of acquiring the company which generates NIS 7 billion in annual revenues.
Calcalist further learned that international private equity fund Bain Capital and Chinese communications corporation China Telecom, which is seeking to enter the European market, examined the acquisition of Partner's controlling interest.
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