Axiata Group, Telenor Asia and Digi have concluded the due-diligence exercise and signed the transaction agreements for the proposed merger of Celcom and Digi in Malaysia. The merger talks were initially announced on 8 April. According to Axiata, on a pro forma basis, the merged company will serve 19 million customers with revenue of MYR 12.4 billion, EBITDA of MYR 5.7 billion, profit of MYR 1.9 billion and free cash flow of MYR 4 billion.
Axiata and Telenor will be equal partners with 33.1 percent ownership stake each in the merged company, which will continue to be listed on Bursa Malaysia Securities. Targeted to be among the five largest companies listed on Bursa in terms of market capitalization, the merged entity is valued at a combined pre-synergy equity value of MYR 50 billion.
The integration planning phase will include detailed work on synergies and business plan of the merged company, and initial estimates indicate potential value accretion through cost and capex synergies of MYR 8 billion on a net present value basis.
The merged entity also plans to make an investment of up to MYR 250 million over five years in building an Innovation Center in Kuala Lumpur. This Innovation Center will conduct research and development, develop 5G use cases, and support local digital startups.
Axiata and Telenor have agreed to appoint Izzaddin Idris as chair, Jorgen C. Arentz Rostrup as deputy chair, Idham Nawawi as CEO and Albern Murty as deputy CEO of the merged company, which will be renamed to Celcom Digi. Axiata and key Malaysian institutional shareholders are expected to own more than 51 percent of the merged company at completion.
Axiata and Telenor also reiterated their commitment to protect employee welfare with no forced retrenchments.
At completion, the merger of Celcom and Digi will result in Axiata receiving newly issued ordinary shares in Digi, representing 33.1 percent of the enlarged issued share capital of Digi, cash consideration of MYR 2 billion of which MYR 1.7 billion will come from Digi as debt in the merged company and MYR 300 million from Telenor as part of an ownership equalisation under the terms of the proposed merger.
Completion of the transaction will be subject to the approval of both Axiata and Digi shareholders, regulatory approvals and other customary terms and conditions. The proposed merger is expected to be completed by the second quarter of 2022.
