PETALING JAYA: Axiata Group Bhd, Telenor Asia Pte Ltd and Digi.Com Bhd have signed transaction agreements for the proposed merger of Celcom Axiata Bhd and Digi.Com Bhd to form MergeCo (to be renamed Celcom Digi Bhd after shareholders’ approval), which will be a new force in the highly competitive telecommunications market in Malaysia.
Axiata and Telenor will be equal partners with 33.1% ownership each in MergeCo, and MergeCo will continue to be listed on Bursa Malaysia Securities. Targeted to be among the five largest companies listed on Bursa Securities in terms of market capitalisation, MergeCo is valued at a combined pre-synergy equity value of close to RM50 billion.
On a pro forma basis, MergeCo will serve an estimated 19 million customers with revenue of RM12.4 billion, earnings before interest, tax, depreciation and amortisation (ebitda) of RM5.7 billion, profit after taxation of RM1.9 billion and free cash flow of RM4.0 billion.
The merger of Celcom and Digi will result in Axiata receiving newly issued shares representing 33.1% of the enlarged issued share capital of Digi, cash consideration of RM2 billion of which RM1.7 billion will come from Digi as debt in MergeCo and RM300 million from Telenor as part of an ownership equalisation.
Axiata and key Malaysian institutional shareholders are expected to own more than 51% of MergeCo at completion.
Axiata president & group CEO Datuk Izzaddin Idris said assuming a smooth transition, post integration period, it is expecting to see improvement in ebitda and cashflow margins in the combined entity in step with its ongoing commitment to maximise dividend payout for shareholders.
Axiata and Telenor have reiterated their commitment to protect employee welfare with no forced retrenchments.
The integration planning phase will include detailed work on synergies and business plan of MergeCo, and initial estimates indicate potential value accretion through cost and capex synergies of around RM8 billion on a net present value basis.
MergeCo will aim to make an investment of up to RM250 million over five years in building a world-class innovation centre in Kuala Lumpur with the intention to catalyse the 4IR digital transformation, strengthen the local ecosystem and keep Malaysia at the forefront of the global digital evolution. The centre will conduct extensive research and development, develop 5G-use cases, support local digital startups, and provide a platform to nurture the creation of a knowledge-based workforce in line with the aspirations of MyDigital, Malaysia’s digital economy blueprint.
The merger is subject to the approval of Axiata and Digi shareholders, regulators and other terms and conditions. It is expected to be completed by the second quarter of 2022.
