Shares in Slovak Telekom are to be sold directly and not via the stock exchange after all, after the government received a more favourable offer from a strategic investor. This is most likely to be Deutsche Telekom, according to eTrend.sk, as it has the right of first refusal. Interim economy minister Peter Kazimir justified the government's decision by saying it would attract a higher price. About 2,500 members of the public who could have become minority investors will be disappointed, but will get their money back.
Foreign investors were willing to pay EUR 750 million for the shares in Slovak Telekom, which was the lower end of the price range. The government expected more, with EUR 1 billion being mentioned in connection with the sale for some time. Slovakia will probably use the money from the sale to buy Slovenske elektrarne from the Enel Group.
From the beginning, the government had been contemplating two ways of selling its 49 percent stake in Slovak Telekom. One was a direct sale with a pre-emptive right for majority shareholder Deutsche Telekom, and the other was an IPO. Initially, the government did not agree to a direct sale with its German partners, and began preparing a public offering. The plan was to sell via the London and Bratislava stock exchanges. On 07 May, the government approved the sale at EUR 17.70 per share, but then finally decided otherwise.
According to Kazimir, on the morning of 07 May, the government got a more favourable offer from a strategic investor. The government did not disclose any further details about the investor or the amount offered. The most probable investor is Deutsche Telekom, according to eTrend.sk, as it has right of first refusal and, unlike other potential investors, can affect the dividend policy of Slovak Telekom. It could therefore offer a higher price.
According to Kazimir, the price set by investors is affected by the capital structure and dividend policy of the operator. Both of them are outside the control of the Slovak government and are, unfortunately, the result of the manner of the earlier privatisation under Mikulas Dzurinda, said Kazimir.
One of the reasons why the state wants to get rid of its share is that the majority shareholder has restricted the payment of dividends. In its recent plans for an IPO, the government agreed with Deutsche Telekom in a memorandum that in future, dividends of 50 to 80 percent of the profit would be paid. By affecting the dividend policy, Deutsche Telekom also affected the price of the state's stake.
Small investors will get their money back without any extra costs but costs will have been incurred for the financial institutions engaged. Citigroup and JP Morgan are the joint global coordinators and joint book-runners of the offering, while Erste Group and Wood & Co are the joint lead managers.
According to the information published by the National Property Fund (FNM) in July 2014, in the case of a successful IPO, the Slovak government would pay 2.2 percent of revenues, which in the case of a value of EUR 750 million represents EUR 16.5 million.
In the case of a direct sale to Deutsche Telekom, the commission for banks would be 1.5 percent and in the case of sale to a third entity, it would be 1 percent. Co-owner Deutsche Telekom limited its costs in the agreement to a maximum of EUR 1.25 million. As the banks provided their services and the IPO was successful from the point of view of the investors, it is not clear whether Slovakia will have to pay the full amount agreed.
