KUALA LUMPUR: Axiata Group Bhd and Norway's Telenor ASA have signed a definitive agreement to merge their respective units, Celcom Axiata Bhd and Digi.Com Bhd, valuing the merged entity (MergeCo) at close to RM50 billion.
Axiata and Telenor said they, together with Digi, had concluded the due-diligence exercise and signed the transaction agreements for the merger.
The merger was expected to be completed by the second quarter of 2022, Axiata and Telenor said in a joint statement today.
Completion of the transaction is dependent on the approval of Axiata and Digi shareholders, regulatory approvals and other customary terms and conditions.
At completion, the merger will result in Axiata representing 33.1 per cent of the enlarged issued share capital of Digi.
"Axiata and Telenor will be equal partners with 33.1 per cent ownership stake each in MergeCo, and MergeCo will continue to be listed on Bursa Malaysia Securities Bhd.
"Targeted to be among the five largest companies listed on Bursa in terms of market capitalisation, MergeCo is valued at a combined pre-synergy equity value of close to RM50 billion," they said.
From the aspect of Malaysia's national interests, Axiata and key Malaysian institutional shareholders are expected to own more than 51 per cent of MergeCo at completion.
On a proforma basis, MergeCo will serve an estimated 19 million customers with revenue of RM12.4 billion, earnings before interest, taxes, depreciation and amortisation (Ebitda) of RM5.7 billion, net profit of RM1.9 billion and free cash flow of RM4.0 billion.
Telenor Group executive vice president and head of Asia Jørgen A. Rostrup said the company looked forward to partnering with Axiata to realise the potential of MergeCo.
"With this merger, we bring together competencies, financial strength and scale to go beyond connectivity and implement technology that further advances our customers' digital experience," said Rostrup.
Axiata president and group chief executive officer Datuk Izzaddin Idris said the company was charting good progress in the ongoing merger exercise with Telenor and Digi.
Izzaddin said Axiata remained aligned in its intentions to deliver a strong value proposition that would enable its customers to participate more confidently as the nation transitions towards a digital economy.
"We look forward to delivering better value and choices to benefit society, especially in bridging the divide in rural areas and assisting the Home and Enterprise businesses take advantage of new opportunities in this digitally accelerated environment.
"Assuming a smooth transition, post integration period, we are expecting to see improvement in Ebitda and cash flow margins in the combined entity in step with our ongoing commitment to maximise dividend payout for our shareholders," he said.
The integration planning phase will include further detailed work on synergies and business plan of MergeCo.
Axiata and Telenor said initial estimates indicate potential value accretion through cost and capex synergies of around RM8 billion on a net present value basis.
MergeCo would see the combination of the scale, experience, competencies and financial strength of both global telecom groups with the market knowledge of two well-established local companies, they added.
Uniquely positioned to address Malaysia's increasing digital service adoption and expectations of better connectivity, MergeCo will have the capabilities to leverage on technology advancements and attract global internet-based partnerships to deliver a wider range of innovative solutions to its customers.
MergeCo will also aim to make an investment of up to RM250 million over five years in building a world-class Innovation Centre here to catalyse the Industry Revolution 4.0 digital transformation, strengthen the local ecosystem and keep Malaysia at the forefront of the global digital evolution.
Axiata and Telenor also reiterated their commitment to protecting employee welfare with no forced retrenchments.
"MergeCo is slated to create opportunities for staff to continue to develop across functions, build new competence and be part of future growth of the merged company," they said.