Cellcom to lend Elco NIS 100m to buy Golan Telecom

Nir Sztern and Michael Golan

Approval of the deal with the loan poses a challenge to the Antitrust  Authority.

As reported by "Globes," Israeli mobile operator Cellcom Israel Ltd. (NYSE:CEL; TASE:CEL) will lend Elco Holdings Ltd. (TASE: ELCO) subsidiary Electra Consumer Products Ltd. (TASE:ECP) NIS 100 million to buy mobile operator Golan Telecom Ltd.. Signing of the deal is slated for today. The loan will pose a great challenge to the Israel Antitrust Authority, because it makes Cellcom in effect the indirect owner of Golan Telecom, after the Antitrust Authority refused to allow Cellcom to acquire the company.

The deal has been in the pipeline for several months, with ups and downs in the negotiations. What convinced Elco to go ahead with it was the loan that Cellcom agreed to grant; without the loan, Elco would not have agreed to the deal. Cellcom also offered the loan to other parties involved in acquisition negotiations.

The total amount of the deal is NIS 350 million, as Electra reported to the TASE, following the report in "Globes." In addition to the payment to Golan Telecom's shareholders, Elco will have to pay Cellcom an estimated NIS 200-250 million a year for ownership of 50% of the two companies' joint network.

It will be very interesting now, because the Ministry of Communications will also have to approve the deal in the framework of its network sharing policy. This means that the two companies will have to establish a joint corporation to manage the network, which Cellcom employees have announced that they will oppose.

Partner Communications Ltd. (Nasdaq: PTNR; TASE: PTNR) recently emphasized to analysts that it planned to exert all its power in order to verify that Cellcom and Elco meet the same terms set by the Ministry of Communications for its joint network with HOT Mobile Ltd..

Published by Globes [online], Israel business news - www.globes-online.com - on January 2, 2017

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

Nir Sztern and Michael Golan
Nir Sztern and Michael Golan
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