Global Telecom Holding (GTH) signs agreement with the Egyptian Tax Authority to settle the company’s and its Egyptian subsidiaries’ outstanding tax liabilities estimated at $136m until 31 December 2018, the ministry of finance announced.
GTH would pay its tax arrears over two batches; the first is worth $53.7m, to be paid upon signing the agreement, and the second is worth $82.3m, a Wednesday statement by the ministry revealed.
Meanwhile, Veon Holdings, which holds a controlling stake of GTH, has adjusted its mandatory tender offer for the purchase of the shares of GTH not currently held by VEON (approximately 42.31% of GTH’s issued shares), to EGP 5.08 per share, down from EGP 5.30, after the settlement of the tax dispute for $136m (EGP 2.3bn) instead of the previous tax estimation of EGP 5.5m.
Research centres predicted that Veon would get lucky with its third attempt to complete its acquisition of GTH following the reduction in the offer price, which is considered fair by financial analysts given the developments of the tax settlement for EGP 2.3bn.
Naeem Holding view the development as a positive outcome not just for GTH’s minority shareholders, but also from an overall Egyptian Exchange (EGX) perspective (unlocking more than EGP 10bn of cash to EGX investors). Most importantly, while the tax settlement amount ($136m) is in-line with the widely rumoured figures in the market, the same nevertheless, is well below the initially claimed amount that was in excess of EGP 5bn ($290m)
“The revised offer price, based on our calculations, implies that Veon has assumed 80% of the tax liability on its own books with the rest 20% (EGP 0.22/share) is deducted from the offer price–in our view, a better than expected outcome for minority shareholders,” Naeem added.
“For the immediate future, we now await GTH’s next move to enable shareholders to submit/tender their shares to the company in order to exercise the option to sell; we expect the same to happen within days (possibly initiated by a newspaper advertisement).”
Regarding the extraordinary general meetings (EGMs) on 27 August to approve the offer and the delisting of shares, the same would require a minimum 75% yes-vote. In addition, the EGM vote could exclude Veon and its executives represented in the board, Naeem said.
Amr Al-Alfy, head of research at Shuaa Securities: “According to the new tax settlement, the offer price of GTH was supposed to drop by about 47 piasters to EGP 4.83 per share.”
Therefore, he considered the EGP 5.08 price fair and attractive to minority shareholders, especially in accordance with the new tax settlement, especially that Veon will bear about half of the tax settlement value.
Al-Alfy pointed out that the new offer price represents a downgrade in the value of GTH by about EGP 1bn.
He expected the minority stakeholders would respond positively to the offer to avoid the risk of investing in an unregistered company and the difficulty of exiting.
Ahmed Adel, a telecommunications analyst at Beltone Financial, also finds the revised offer price fair under the new tax settlement, and that a 4% reduction in the price is nothing compared to the benefits minority shareholders would be getting as their burden in the tax settlement drops to nearly a quarter of the value.
Adel stressed that the new offer price is still attractive to shareholders, expecting the deal to be sealed soon after the end of the tax crisis. He added that the implementation of the deal is very important for the market and will allow in new liquidity.
Veon owns 57.7% stake of GTH which operates in mobile networks in Algeria, Pakistan, and Bangladesh, with more than 102 million customers.