KUALA LUMPUR (June 21): Axiata Group Bhd, Telenor Asia Pte Ltd and Digi.Com Bhd have successfully concluded the due diligence exercise and have inked the transaction agreements for the proposed merger of Celcom Axiata Bhd and Digi (MergeCo).
In a joint statement today, the parties said the signing confirms the intent to establish a commercially stronger and more resilient digital converged service provider.
The statement said on a pro forma basis, MergeCo will serve an estimated 19 million customers with revenue of RM12.4 billion, pre-tax earnings of RM5.7 billion, profit after tax of RM1.9 billion and free cash flow of RM4 billion.
Axiata and Telenor will each hold equal stakes of 33.1% respectively in MergeCo, which will continue to be listed on the local bourse, and will have a combined pre-synergy equity value of close to RM50 billion.
The parties said the integration planning phase will include further detailed work on synergies and business plans of MergeCo, and initial estimates indicate potential value accretion through cost and capex synergies of around RM8 billion on a net present value basis.
MergeCo aims to make an investment of up to RM250 million over five years in building a world-class innovation centre in Kuala Lumpur with the aim to catalyse the industry revolution 4.0 digital transformation, strengthen the local ecosystem and keep Malaysia at the forefront of the global digital evolution.
The innovation centre will conduct extensive research and development, develop 5G use cases, support local digital startups, and provide a platform to nurture the creation of a knowledge-based workforce in line with the aspirations under the government’s MyDIGITAL blueprint.
Axiata president and group chief executive officer Datuk Izzaddin Idris said both parties are charting good progress in the ongoing merger exercise, and remain aligned in their intentions to deliver a strong value proposition.
“Assuming a smooth transition, post integration period, we are expecting to see improvement in EBITDA and cashflow margins in the combined entity in step with our ongoing commitment to maximise dividend payout for our shareholders,” he said.
Telenor Group executive vice president and head of Asia Jørgen A Rostrup said the group is looking forward to partnering with Axiata to realise the potential of the proposed merged company.
“The telecom industry is at the beginning of an exciting digital shift, and new technologies are going to change how we develop and deliver services for both the private and public sector.
“With this merger we bring together competencies, financial strength and scale to go beyond connectivity and implement technology that further advances our customers' digital experience,” Rostrup said.
Izzaddin will be chair and Rostrup will be deputy chair of MergeCo, which will be renamed to Celcom Digi Bhd upon shareholders’ approval, while Idham Nawawi and Albern Murty will be serving as CEO and deputy CEO respectively.
Meanwhile, from the aspect of Malaysia’s national interests, Axiata and key Malaysian institutional shareholders are expected to own more than 51% of MergeCo at completion.
Both parties have committed to protecting employee welfare with no forced retrenchments.
Upon completion, Axiata will receive newly issued ordinary shares in Digi, representing 33.1% of the enlarged issued share capital of Digi, cash consideration of RM2 billion, of which RM1.7 billion will come from Digi as debt in MergeCo and approximately RM300 million from Telenor as part of an ownership equalisation under the terms of the proposed merger.
The proposed merger is expected to be completed by the second quarter of 2022, subject to the relevant approvals.
At 12.30pm, Axiata shares fell six sen or 1.5% to RM4.03, translating to a market capitalisation of RM36.97 billion.
Digi rose 13 sen or 3.1% to RM4.31, giving a market capitalisation of RM33.5 billion.