Telekom Malaysia Bhd intends to maintain the listing status of Celcom (M) Bhd even though a full take-up rate of its mandatory general offer (MGO) for Celcom shares would give Telekom the option to take the cellular company private.
Telekom chief executive Datuk Dr Khir Abdul Rahman told a briefing yesterday that he was confident the take-up rate for the MGO would be high, given the uncertainties arising from the current geo-political situation. The MGO price is RM2.75 per Celcom share, whichclosed yesterday at RM2.61.
The documents for the MGO are slated to be despatched by May 5, with the closing date scheduled for May 26. Telekom's targeted deadline to pay Celcom shareholders who accept the general offer is mid-June.
Should the acceptance level fall below 75%, Celcom would continue to be listed; but should it soar close to 90%, then Telekom would have to place out shares to maintain the public float, according to Khir.
The contention here is whether Telekom could get the same price of RM2.75 for each of the Celcom shares that it has to pay for the MGO.
Telekom has a 31.25% stake in Celcom now and this stake will rise to RM48% after the sale of its unit TM Cellular to Celcom, which is via a share swap. The exercise will trigger a MGO for which Telekom would seek shareholders approval at an EGM on March 31.
According to Khir, Telekom would be willing to place out shares so long as it does not create adverse financial implications to the company.''
But before the MGO documents can go out, Celcom's own shareholders would have to vote at the company's EGM this Thursday for all the resolutions to be carried out.
If, for whatever reason, the resolutions are not passed, the MGO would become unconditional and therefore Telekom would no longer be obliged to carry on with the MGO at RM2.75 a share.
Nevertheless, Telekom and Celcom officials remain confident that the resolutions to buy Telekom's subsidiary TM Cellular at RM1.65bil and merge it with Celcom would be passed, since it has received positive feedback from its roadshow in Kuala Lumpur, Singapore, and Hong Kong last week.
Officials from Telekom and Celcom had met up with hedge funds (the bulk of those who had bought Celcom restricted shares at RM1 in 2001) and institutional investors, and the indication was that they are positive towards the merger. Foreign fund managers hold about 17% of Celcom.
In a statement yesterday, Celcom said Khazanah Nasional Bhd and Minister of Finance Inc, both parties related to Telekom, would abstain from voting at the Celcom EGM.
Both Khazanah and MOF have less than 2% in Celcom. Telekom would also abstain from voting but EPF, with a 11.13% stake in Celcom, would exercise its rights at the EGM. Celcom only needs support from holders of 681 million shares, on the assumption of full attendance at the EGM for its resolutions to be carried out.
Meanwhile, Khir said Telekom would be issuing a domestic bond issue to fund the MGO. It has thus far forked out RM1.65bil for its 31.25% stake. It would have to fork out an additional RM3.75bil for the MGO.
Khir reiterated Telekom's intention to proceed with the merger process despite the arbitration sought by Deutsche Telekom (DT), which has a 8% stake in Celcom.
DT is said to be seeking damages under the terms and conditions of its supplemental agreement with Technology Resources Industries Bhd, Celcom's former parent, and Celcom.
As you know, Telekom and Celcom are in the final stages of concluding the transaction. The merger makes good business sense and we will be in a strong position to capitalise on operational and other synergies.
We are of the view that the business combination of TM Cellular and Celcom will enhance shareholder value for both Te- lekom and Celcom as well as other shareholders.
The customers of the two cellular companies will also benefit from this merger.''
He added that the operational and capital expenditure savings arising from the merger of Celcom and TM Cellular would amount to RM350mil and RM1.2bil respectively for this and next year.