Patrick Drahi, who controls HOT Telecommunication Systems Ltd. (TASE: HOT) through Cool Holdings Ltd., is making an offer to purchase the shares of Hot held by the public. Drahi currently holds 69.25% of Hot, and seeks to buy the remaining 30.75%. Drahi wrote to the Hot board on Thursday, in the name of Cool Holdings, with a proposal to offer NIS 37 cash for each Hot share, which values the company at about NIS 2.7 billion. Drahi points out that this represents a premium of 12.5% over Hot's average closing share price in July, and says that it also represents an attractive opportunity for Hot shareholders to liquidate their holdings in a stock that is not very liquid.
In his letter, Drahi writes, "In the past few months, we have seen siginificant changes in the telecommunications and media industry, characterized by a more competitive environment and substantial regulatory changes. The industry faces new regulation which creates uncertainty about the competitive framework of the market in the short and medium terms. The latest changes have had a great effect on the way investors perceive this field, and consequently on Hot. We believe that these changes embody an opportunity for Cool, but also many risks that can be better dealt with in the context of private ownership."
Cool proposes to set up a new company for the purposes of the transaction, and expects to complete it within 30 days of obtaining the approval of Hot's shareholders.
Hot recenty reported that it had recruited more than 250,000 subscribers to its new mobile telephony service, 142,000 of them in the second quarter, and the rest since the end of the quarter. However, so far at least, the investment in the mobile activity is exacting a high price as far as Hot's profit line is concerned. The company's second quarter net profit was just NIS 4 million, compared with NIS 78 million in the corresponding quarter. First half profit fell 60%, to NIS 63 million.
HOT's share price rose 12.9% by midday to NIS 38.30, giving a market cap of NIS 2.5 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on August 26, 2012
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