Target: MobilTel EAD, Bulgarian mobile phone network operator. Established in 1994, MobilTel is the largest mobile phone operator in Bulgaria with 2.7 million subscribers and a turnover of ?432 million ($533 million) in 2003.
Bidder: A private equity consortium comprising seven investment funds led by ABN Amro Capital, CVC International and Communication Venture Partners.
Seller: A consortium comprising Austria’s third-biggest bank BAWAG, Taus family fund Management Trust Holding, financial company Kordt und Partner and family trust MC-Privatstiftung
Bid value: ?1.1 billion
Dollar equivalent: $1.37 billion
Acquired stake: 40%
Deal technique: Leveraged buy-out
Announcement date: April 17 2004
Date completed: July 5 2004
Financing structure: ?450 million of equity and ?650 million of acquisition debt, ?450 million of the debt being a five-year syndicated lending facility (the largest ever in Bulgaria) and a ?200 million bridge loan that expires after 365 days. The bridge loan is expected to be refinanced by a bond issue before the end of the year.
Lenders: ABN Amro Bank, Citibank and ING Bank as lead arrangers
Legal advisors: Allen & Overy, Paris office, advising the lenders, led by Vikki Greatorex. Haarmann Hemmelrath, led by Bernd Sagasser, and Linklaters, led by Derek Hayward, advising the equity consortium.
Landmarks: The largest leveraged buy-out in central and eastern Europe, the largest syndicated loan in Bulgaria.
In mid-April a consortium led by Citigroup announced it intended to buy a 40% stake in Bulgarian mobile phone operator MobilTel. The consortium teamed up with three of the company’s existing shareholders to make the offer. The size of the deal and its popularity in pre-syndication (the lending facility available was ?600 million despite only ?450 million being needed) sets a powerful precedent for investment in central and eastern Europe and is expected to herald more private equity takeovers and straight M&A in the new and future members of the EU. The purchase contract was signed on May 26 and closed on July 5.
Investors comments: Sunile Nair, managing director, Citigroup Venture Capital International
?It was a very successful deal and a landmark transaction for Bulgaria. ?It sets a strong precedent for deals of such size and magnitude for both Bulgaria and the CEE region.
?CEE is a key focus region for us. The integration of new countries into the EU and the strengthening of legal and regulatory frameworks will encourage further sizeable private equity investment in the region.
Colin Clark, CVC International
?The success in raising significant amounts of debt and equity to support the largest ever LBO in CEE demonstrates the level of confidence market participants have for Bulgaria.?
Lawyer’s comments: Vikki Greatorex, Allen & Overy
“There were some regulatory issues surrounding the deal as the third mobile licence holder in Bulgaria, BPC, was having its licence re-examined at the time. It had been blocked by the courts and objected to by several competitors. This created an atmosphere of regulatory scrutiny more than anything else. If there was any chance that MobilTel’s licence was under threat it would have created big problems for the deal.
“The deal itself was only problematic in that the waters were untested. There was no market standard for this type of investment in Bulgaria and the company had to be aware what restrictions the financing placed on them. We had to create the market standard.
“MobilTel is a good asset and a strong business, but the overwhelming success of the deal was mostly due to the optimism in Bulgaria as to the future of their economy.
“There will be more deals of this type. There’s a lot of money around in private equity and CEE is a big target area.”
