KUALA LUMPUR (May 26): Axiata Group Bhd, which is in the midst of merging its mobile operator Celcom Axiata Bhd and Digi.com Bhd, will let its shareholders vote on its proposed acquisition of 66.03% stake in Indonesia's PT Link Net Tbk (LinkNet) for 8.72 trillion rupiah (about RM2.55 billion).
The company's shareholders are currently attending the extraordinary general meeting to be held at Axiata Tower here on Thursday (May 26).
According to data compiled by Bloomberg, Khazanah Nasional Bhd is Axiata's largest shareholder, holding a 36.74% stake or 3.37 billion shares of the company.
It is followed by Employees Provident Fund (EPF) with 1.56 billion shares or a 16.95% stake, Permodalan Nasional Bhd's wholly owned investment fund management company Amanah Saham Nasional Bhd (ASNB) with 1.35 billion shares or a 14.67% stake, and pension fund Kumpulan Wang Persaraan (Diperbadankan) with a 2.93% stake.
However, EPF and ASNB, which together hold 31.62% of Axiata shares, are blocking the deal for the acquisition, according to a source familiar with the matter.
The source said the issues revolve around the impact of funding and gearing, which is highly reliant on the success of the Celcom-Digi merger.
"At a time when capex (capital expenditure) is needed for acquisitions in the Philippines, [there is concern about] impact on dividends, as well as on the structure of the acquisition of both Axiata and [Axiata] XL," the source said.
In late January, Axiata said its indirect wholly owned unit Axiata Investments (Indonesia) Sdn Bhd (AII) and PT XL Axiata Tbk, an indirect 61.48% subsidiary of the group, entered into a conditional share purchase agreement with Asia Link Dewa Pte Ltd (ALD) and PT First Media Tbk (FM) to acquire LinkNet's 1.82 billion shares.
LinkNet is among the leading providers of high-speed broadband and cable TV in Indonesia, reaching 2.9 million homes across 23 cities with a revenue-generating unit for broadband internet of approximately 855,000 and cable TV of approximately 837,000.
Upon completion of the acquisition, AII will be obligated to undertake a proposed mandatory tender offer as per the regulations of the Indonesian Financial Services Authority. AII and XL shall acquire 46.03% and 20% respectively from the combined stakes of ALD and FM in LinkNet.
On the other hand, stockbroking firms such as RHB Research and Hong Leong Investment Bank (HLIB) Research have viewed the exercise positively.
"We view the transaction positively, as: i) it would solidify the group's position and converged ambitions in Indonesia, and ii) drive a new leg of growth with longer-term earnings uplift. Axiata remains our preferred mobile exposure, on undemanding valuations and the earnings recovery thesis, with upside from the domestic mobile merger," said RHB in a note dated Jan 28.
RHB kept its "buy" call with a target price (TP) of RM4.84. "Our TP incorporates a 2% ESG premium based on our in-house methodology."
HLIB Research meanwhile commented: "We view this development positively concerning the synergies between XL Axiata and LinkNet through their combined positions in wireless communication services, sharing of backbone and transmission networks and extensive relationships with customers in Indonesia. Coupled with XL Axiata's enterprise offerings including mobile connections, LinkNet will be well positioned to capitalise on the growing enterprise market."
HLIB Research reiterated its "hold" call with unchanged sum-of-parts TP of RM4.06.
At noon break on Thursday, Axiata shares fell 1.88% or six sen to RM3.13, with a market capitalisation of RM28.72 billion.