France Telecom said it had reached a preliminary accord to buy out most of Egyptian tycoon Naguib Sawiris' stake in their jointly owned telecom operator Mobinil, in a deal that will see the French group pay out about $1.9 billion, according to Reuters.
France Telecom (Paris) was already the largest shareholder in Mobinil, and Egypt is a key part of its effort to expand in high-growth emerging markets in Africa and the Middle East. The new accord simply accelerates the expected exit of Sawiris, who had a put option to sell out to France Telecom starting in September 2012.
The two sides were in talks in recent days over the terms of the put option because it ascribed a much higher value than Mobinil's current market valuation, which has shriveled after Egypt's revolution paralyzed much of the economy.
Under the terms of the accord, which still needs regulatory approval, France Telecom would buy Sawiris' stake for $33.5 per share. Then it will make a tender offer at the same price to the minority shareholders of the listed portion of Mobinil, known as ECMS.
The price offered by France Telecom represents a 48.5% premium over the ECMS closing price on Thursday of $22.5 per share.
It represents a discount of nearly 8.7% from the initial price set out in Sawiris' put option that called for France Telecom to pay $36.7 per share in September, rising later to $41.1 per share.
France Telecom had already set aside $2.5 billion in its accounts in anticipation of buying out Sawiris under the put option, according to analysts.
Mobinil, which is Egypt's largest telecom company, was the subject of a drawn-own legal fight between Sawiris and France Telecom several years ago that ended in April 2010 with a new shareholders' agreement. Under the settlement, Sawiris won put options to eventually exit the company by selling to France Telecom.
For France Telecom, Mobinil is part of its effort to expand its footprint in high-growth emerging markets to offset tough competition in its home market. Egypt, where it competes with Vodafone's (London) local unit, represents one of France Telecom's biggest emerging market bets.
The French group has also expanded in about 20 other African and Middle Eastern countries including Tunisia, Morocco, Iraq, Senegal and the Ivory Coast.
(Reporting by Leila Abbound, Gwenaelle Barzic and Shaimaa Fayed; Editing by Christian Plumb and Jon Loades-Carter)