Sources inform ''Globes'' that HOT Telecommunication Systems Ltd. (TASE: HOT) controlling shareholder Patrick Drahi has offered a new format for its acquisition of his company Mirs Communications Ltd. - halving his original NIS 1.3 billion asking price. HOT's general shareholders meeting to approve the controversial deal has been rescheduled and will take place within two weeks.
Institutional investors in HOT oppose its acquisition of Mirs on the grounds of the exorbitant asking price, double what Drahi paid for the company when he bought it from Motorola last year. Drahi is now asking an initial NIS 500 million for Mirs (NIS 750 million net of Mirs' debts) - similar to the price he paid for it.
Drahi is eligible for additional payments, subject to HOT meeting earnings before interest, taxes, depreciation and amortization (EBITDA) milestones over the next few years and Mirs's market share. He has sent the new proposal to the institutional investors' advisor, Entropy Consultants Ltd., which will suggest how they should vote.
HOT attributed the difference between Drahi's asking price for Mirs and the price he paid for it to the company's win in the Ministry of Communications mobile carriers tender earlier this year. HOT commissioned TASC Strategic Consulting Ltd. to value Mirs for the merger, and it set a company value of NIS 1.05 billion.
However, an independent consultant, David Solomon's DS Analysts Ltd., estimated Mirs' fair value at just NIS 450-500 million.
HOT's institutional investors told the company's chairwoman Stella Handler that they demanded a reduction in price for Mirs and the setting of milestones for payment.
Capital market analysts were astonished at Drahi's asking price for Mirs following TASC's valuation in July. DS Apex VP research Eran Jacobi said that the price was crazy and questioned the valuation's assumptions. Migdal Capital Markets analyst Amir Adar advised that the deal should only be approved if the price was cut to NIS 813 million and payment was based on milestones.
HOT's shareholders will meet on September 19 to vote on the Mirs acquisition. As a party at interest, Drahi cannot vote. A majority of disinterested shareholders must vote in favor, or, alternatively, the number of opponents among disinterested shareholders must not exceed 2%.
Drahi owns 51.7% of HOT through Cool Holdings Ltd. and he owns 100% of Mirs. Other HOT shareholders include Yediot Communications Ltd. (16.5%) and Fishman Holdings (6.5%). Drahi has an agreement to buy Yediot's stake for NIS 650 million, which may mean that Yediot will be considered a party at interest for the purposes of the Mirs vote.
This means that HOT's institutional investors have added weight in the shareholders' vote, even though none of them has a substantial holding in the company. Harel Insurance Investments and Financial Services Ltd. (TASE: HARL) and Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) are two of these investors.
HOT's share price rose 2.4% to NSI 46.09 today, giving a market cap of NIS 3.5 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on September 8, 2011
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