Majority Takeover of Telekom Austria AG by America Movil SAB de CV
1. MERGERS & ACQUISITIONS
INDIVIDUAL ASSIGNMENT
ABSTRACT
This report deals with the valuation and financing aspect of the majority takeover of Telekom Austria AG by America Movil SAB de CV.
Sneha Malhotra
2013284
2. TABLE OF CONTENTS
INTRODUCTION ...................................................................................................................................................... 2
ABOUT THE ACQUIRER COMPANY ......................................................................................................................... 2
ABOUT THE TARGET COMPANY .............................................................................................................................. 3
TELECOM INDUSTRY OUTLOOK .............................................................................................................................. 3
Worldwide .......................................................................................................................................................... 3
Brazil ................................................................................................................................................................... 4
Europe ................................................................................................................................................................ 4
Russia .................................................................................................................................................................. 4
India .................................................................................................................................................................... 4
China ................................................................................................................................................................... 5
OTHER DEALS IN THE INDUSTRY ............................................................................................................................. 6
DEAL VALUATION (MULTIPLES OF SALES, EBITDA, EBIT, NET INCOME & BOOK VALUE) ....................................... 8
COMPARABLE firms .............................................................................................................................................. 11
EXCHANGE RATIO, CONSIDERATION (CASH / STOCK) .......................................................................................... 11
PREMIUM PAID ON THE CURRENT MARKET VALUE ............................................................................................. 12
FINANCING............................................................................................................................................................ 13
INTEGRATION ISSUES ............................................................................................................................................ 14
3. INTRODUCTION
On May 15, 2014 America Movil SAB de CV (AMX) launched a public tender offer to acquire all outstanding shares of Telekom Austria (TKA) not held by The Österreichische Industrieholding AG (Austrian industry-holding stock corporation) or short ÖIAG, which administers the investments of the Republic of Austria in partially or entirely nationalized companies. After the offer expired on July 10th and AMX obtained almost 104 million shares, equivalent to 23.47% of the share capital of Telekom Austria, at a cost of 743.4 million euros. AMX now holds a stake of approximately 50.80% in the Austrian operator. Before the expiration of the offer all the regulatory conditions in Austria and 6 other countries in Central Europe where TKA operates have been met. ABOUT THE ACQUIRER COMPANY
América Móvil, S.A.B. de C.V. is organized under the laws of Mexico. It was established in September 2000 when Telmex, a fixed-line Mexican telecommunications operator, privatized in 1990 and spun off its mobile operations in Mexico and other countries. They have grown through significant acquisitions throughout Latin America and the Caribbean as well as organically. During 2010, they acquired control of Telmex and Telmex Internacional, S.A.B. de C.V. (currently, Telmex Internacional, S.A. de C.V., or “Telmex Internacional”) in a series of public tender offers.
They provide telecommunications services in 18 countries. We are the largest provider of wireless communications services in Latin America based on the number of subscribers, with the largest market share in Mexico and the third-largest in Brazil. We also have major fixed- line operations in Mexico, Brazil, Colombia and 11 other countries
They intend to build on our position as the leader in integrated telecommunications services in Latin America and the Caribbean by continuing to expand the subscriber base, both by developing existing businesses and by making strategic acquisitions when opportunities arise. They are offering customers new services and new packages that integrate multiple services, and they continue investing in networks to optimize coverage and implement new technologies.
4. ABOUT THE TARGET COMPANY
The Telekom Austria Group is the largest telecommunications company in Austria and is successfully positioned on international markets.
Telekom Austria AG, listed on the Vienna Stock Exchange since November 2000, is the leading communications provider in Central and Eastern Europe with about 23 million customers across its markets of operations. The Group is currently operating in eight countries: Austria (A1), Slovenia (Si.mobil), Croatia (Vipnet), the Republic of Serbia (Vip mobile) and the Republic of Macedonia (Vip operator), Bulgaria (Mobiltel), Belarus (velcom) and Liechtenstein (Telecom Liechtenstein). The total market of the eight countries covers approximately 41 million inhabitants. The Group has roughly 16,000 employees as of December 31, 2013, Group revenues were about EUR 4.2 billion as of year-end 2013. Telekom Austria Group's portfolio encompasses products and services of voice telephony, broadband Internet, multimedia services, data and IT solutions, wholesale as well as m-payment solutions. TELECOM INDUSTRY OUTLOOK
The global telecommunication industry had eventful development in 2012. In 2013 the main challenges for telecom companies will be how to monetize new business models, leverage customer data by investing in analytics and define their response to over the top players. Market Research Reports Inc. recently published the latest updates on the global telecommunication industry, some of the key findings including: WORLDWIDE
• Mobile connections growth, which will slow to 7% in 2013, with emerging markets accounting for 89% of net additions. Mobile broadband service will increase by a more respectable 27% and LTE connections will increase by 150%. Fibre connections will grow by 28%
• All vendors will have to deal with the encroachment of software providers in core telecoms software stacks. Companies that are integrating devices, such as Microsoft, Apple and Samsung will be in the strongest positions to capitalize on growth in the device market.
• The global telecommunication services sector will continue to be the largest IT spending market in 2013.
5. • By 2016, mobile data will represent 33% of the total telecom services market, up from 22% in 2012 due to total worldwide IT spending which is expected to reach $3.7 trillion in 2013, a 4.2% increase from 2012
• It is believed that mobile broadband presents the largest opportunity for operators to grow revenue, and is expected to grow 19.2% annually, generating $122.9 bn in incremental revenue between 2013 and 2016
• Emerging nations such as Africa and the Middle East will be intensified by M&A activity in 2013 as smaller operators will find it increasingly hard to compete and raise funds
• In Asia-Pacific, LTE subscription to reach nearly 42m, which whilst only 1% of total subscriptions in the region, that is about one third of global LTE subscriptions
• Android system will represent more than 50% of all smartphone sales in Central & Eastern Europe and close to half of all market sales in Western Europe in 2013 BRAZIL
2012 represented a milestone for the Brazilian mobile market. mobile telephony topped with density of over 130 lines per 100 inhabitants and the country is likely to have annual growth over 10% for the first time EUROPE
Despite the economic downturn with intense competition, and regulatory actions, revenues for the European wholesale telecoms market remained steady between 2010 and 2011. Mobile wholesale, a developing sector in Europe, offers huge potential for growth based on an increasingly diverse customer base. 28 regulators in Europe had created rules focused on lowering prices for customers, In the US and other countries regulators had also focused on spurring innovation and new investments RUSSIA
Russian Telecom market expected to grow 3.5% CAGR 2012 – 2015, mainly driven by mobile data. Mobile data is to grow in Russia with 30% CAGR INDIA
The Telecom sector in India has recorded gross revenue at $ 98 bn curing the quarter ended Sep 2012, an increase of 0.8% over the previous quarter. The government’s earning from the
6. telecom sector in terms of license fee also dipped 1.97% during the July-September quarter over the last 4 years, the sector in India grew by 20% CAGR and the mobile subscriber base crossed 900 million, second to China. The telecom contributes about 3% to India’s GDP CHINA
• The total IT investment in China’ telecom industry was RMB 42.7 bn in 2011, and the telecom industry IT solution market totalled RMB 13.7 bn.
• 3G penetration rate in China was just 20% of the total mobile subscriber base, which reflects significant growth opportunity.
• For different operators, China Mobile topped 82.43 million 3G users, followed by China Unicom’s 73.32 million and China Telecom with 65.85 million
• China will become the world’s largest smartphone market in 2013 as the nation sells 240 million smartphones, which represents one-third of global shipment.
7. OTHER DEALS IN THE INDUSTRY
The number of mergers and acquisitions in Telecom Sector has been increasing significantly. Telecommunications industry is one of the most profitable and rapidly developing industries in the world and it is regarded as an indispensable component of the worldwide utility and services sector. Telecommunication industry deals with various forms of communication mediums, for example mobile phones, fixed line phones, as well as Internet and broadband services.
Currently, a slew of mergers and acquisitions in Telecom Sector are going on throughout the world. The aim behind such mergers is to attain competitive benefits in the telecommunications industry. The mergers and acquisitions in Telecom Sector are regarded as horizontal mergers simply because of the reason that the entities going for merger or acquisition are operating in the same industry that is telecommunications industry.
In the majority of the developed and developing countries around the world, mergers and acquisitions in the telecommunications sector have become a necessity. This kind of mergers also assists in creation of jobs. Both transnational and domestic telecommunications services providers are keen to try merger and acquisition options because this will help them in many ways. They can cut down on their expenses, achieve greater market share and accomplish market control.
Private sector investment and FDI (Foreign Direct Investment) have also boosted the growth of mergers and acquisitions in the telecommunications sector. Over the last few years, a phenomenal growth has been witnessed in the number of mergers and acquisitions taking place in the telecommunications industry. The reasons behind this development include the following:
Deregulation
Introduction of sophisticated technologies (Wireless land phone services)
Innovative products and services (Internet, broadband and cable services)
Economic reforms have spurred the growth in the mergers and acquisitions industry of the telecommunications sector to a satisfactory level.
8. Mergers and acquisitions in Telecom Sector can also have some negative effects, which include monopolization of the telecommunication products and services, unemployment and others. However, the governments of various countries take appropriate steps to curb these problems.
In countries like India, mergers and acquisitions have increased to a considerable level from the mid-1990s. In the United States, the mergers and acquisitions in the telecommunications sector are going on in a full-fledged manner. The mergers and acquisitions in the telecommunications sector are governed or supervised by the regulatory authority of the telecommunication industry of a particular country, for instance the Telecom Regulatory Authority of India or TRAI. The regulatory authorities always keep a tab on the telecommunications industry so that no monopoly is formed.
SIGNIFICANT MERGERS AND ACQUISITIONS IN TELECOM SECTOR
Following are the important mergers and acquisitions that took place in the telecommunications sector:
The takeover of Mobilink Telecom by Broadcom. This can also be described as a suitable example of product extension merger
AT&T Inc. taking over BellSouth
The acquisition of eScription Inc. by Nuance Communications Inc.
The taking over of Hutchison Essar by the Vodafone Group. Now it has become Vodafone Essar Limited
China Communications Services Corporation Ltd. taking over China International Telecommunication Construction Corporation
The acquisition of Ameritech Corporation by SBC (Southwestern Bell Corporation) Communications
The merger of GTE (General Telephone and Electronics) with Bell Atlantic
The acquisition of US West by Qwest Communications
The merger of MCI Communications Corporation with Worldcom
Benefits Provided by the Mergers and Acquisitions in the Telecommunications Sector
9. Following are the benefits provided by the mergers and acquisitions in the telecommunications industry:
Building of infrastructure in a more convenient way
Licensing options for mergers and acquisitions are often found to be easier
Mergers and acquisitions offer extensive networking advantages
Brand value
Bigger client base
Wide array of products and services DEAL VALUATION (MULTIPLES OF SALES, EBITDA, EBIT, NET INCOME & BOOK VALUE)
The main purpose of equity valuation is to estimate a value for a firm or security. A key assumption of any fundamental value technique is that the value of the security (in this case an equity or a stock) is driven by the fundamentals of the firm’s underlying business at the end of the day. There are three primary equity valuation models: the discounted cash flow (DCF), cost and comparable approaches.
There are two primary comparable approaches. The first is the most common and looks at market comparable for a firm and its peers. Common market multiples include the following: enterprise value to sales (EV/S), enterprise multiple, price to earnings (P/E), price to book (P/B) and price to free cash flow (P/FCF).
As extracted from the original takeover documents of Telekom Austria the original statement made by them is “For the purposes of the calculation of the Offer Price, the Bidder has not prepared an independent evaluation of the Target Company. The Offer Price takes into account the statutory minimum purchase price and considers (i) the Reference Price and (ii) the development of the stock market price, whereby the shareholders’ accepting the Offer are entitled to receive the dividend for the 2013 financial year in addition to the Offer Price.”
10. Sales Metrics Multiple Last Twelve Months 5,469.0 1.7x CY 2014E 5,270.6 1.8x CY 2015E 5,283.7 1.7x
* Current Annual ( FY 2013 ) Implied Price Multiples Current EPS Metrics Multiple Last Twelve Months -0.950 - Current Annual 0.000 - CY 2014E 0.364 25.3x CY 2015E 0.492 18.8x Book Value per Share Current 3.582 2.6x CY 2014E 3.027 3.0x CY 2015E 3.542 2.6x Implied Value Multiples Equity Value 4,083.3 Diluted Shares 442.6 Plus: Preferred - Plus: Minority Interest 1.5 Plus: LT & ST Debt 5,325.3
11. Less: Cash -167.3 Net Debt 5,159.5 Enterprise Value 9,242.8 EBIT Last Twelve Months 510.4 18.1x Current Annual #N/A #N/A CY 2014E 380.9 24.3x CY 2015E 560.2 16.5x
Source: Bloomberg
PRICE RATIO BANDS FOR THE PURPOSE OF VALUATION
As has been mentioned above that the calculations for the offer price has been decided upon after taking into account the statutory minimum purchase price and the development of the stock in the stock market. As can be seen from the Bloomberg screen above, the highest stock price was €11.31 per share and the lowest that was recorded was €4.58 per share. Also the highest earning per share (EPS) ratio recorded was €0.40 and the lowest was €0.07. Based on this data the offer price is €7.15 per share.
12. COMPARABLE FIRMS
The greatest competition faced by Telekom Austria is from Deutsche Telekom AG and Orange. Their respective market capitalizations and other relevant information is provided in the table below:
TELEKOM AUSTRIA AG DEUTSCHE TELEKOM AG ORANGE Market Cap: 4.07B 67.85B 39.02B Employees:
16,044
2,29,897
1,60,925 Qtrly Rev Growth (yoy): -0.08 0 -0.05 Revenue (ttm):
5.35B
80.46B
52.55B Gross Margin (ttm): 0.62 0.39 0.4 EBITDA (ttm):
1.46B
19.16B
15.98B Operating Margin (ttm): 0.1 0.09 0.15 Net Income (ttm):
-444.46M
3.11B
2.04B EPS (ttm): 0.43 0.67 0.96 P/E (ttm):
42.35
22.87
15.43 PEG (5 yr expected): N/A 0.48 0.35 P/S (ttm):
0.76
0.83
0.73
Source: Bloomberg EXCHANGE RATIO, CONSIDERATION (CASH / STOCK)
Deal Size/ Multiple Target @ Deal Price Target (Telekom Austria) Acquirer ( America Movil) Price 9.23 9.23 1.30 Exchange Ratio 7.1083 - - Value of Acquirer Shares Per Target Share 9.23 - - Cash per Share - - - Equity Value 4,083.3 4,083.3 90,042.7 Enterprise Value 9,242.8 9,242.8 1,22,479.8 P/E CY 2014 25.3x 25.3x 14.6x P/E CY 2015 18.8x 18.8x 13.7x EV/ EBITDA CY 2014 5.7x 5.7x 6.1x EV/ EBITDA CY 2015 5.5x 5.5x 6.0x
Source: Bloomberg
13. Mexican telecom giant America Movil S.A.B. De C.V. (AMX, AMOV), controlled by Mexican billionaire Carlos Slim, said Monday that it has received shares representing about a 23.47 percent stake in Telekom Austria AG ( TKAGY ) following a public tender offer.
The tender offer by America Movil's subsidiary, Carso Telecom B.V., expired on Thursday, July 10, 2014. The company received 103.98 million shares in the tender offer. America Movil earlier held an about 27 percent stake in Telekom Austria.
Upon settlement of the offer, America Movil will directly and indirectly hold 225.09 million shares in Telekom Austria, representing about 50.8 percent of the European carrier's share capital. America Movil said that payment of the offer price of 7.15 euros per Telekom Austria share will be made on or before July 24 by the receiving and payment agent UniCredit Bank Austria to all shareholders who accepted the offer. The company said it will extend the acceptance period by an additional three months for shareholders who did not participate in the tender offer. PREMIUM PAID ON THE CURRENT MARKET VALUE
% Premium to Current Telekom Austria Price in EUR at Deal Terms
Current
0%
0%
0%
0%
5%
10%
15% Last Close (04/09/2014) in EUR 7.13 7.13 7.13 7.13 7.13 7.48 7.84 8.19 1 Week average
7.13
0%
0%
0%
0%
5%
10%
15% 20d Average 7.13 0% 0% 0% 0% 5% 10% 15% 20d VWAP
7.13
0%
0%
0%
0%
5%
10%
15% 52 Week High 7.44 -4% -4% -4% -4% 1% 5% 10% 52 Week Average
6.64
7%
7%
7%
7%
13%
18%
23%
The above table showcases the various scenarios of premium increment scenario of 5 % starting from 0% till 15% as well as the 20 day volume weighted average price (VWAP) and the 52- week average at 7% premium for current Telekom Austria’s shares in the stock market. As we can see with 5% premium the stock price of the company goes up to €7.48, at 10% premium the stock prices rises to €7.84. The terms at which the deal in question was struck in was at 0% premium.
14. FINANCING
Sources of Funds
Amount
% Total Sources
Issuance of new Stock
4,083.3
100.0%
Cash on Hand
-
Issuance of Debt [USD]
Rate (%)
-
-
Credit facility
4.3090%
-
-
Loan
4.3090%
-
-
Senior Notes
4.3090%
-
-
Senior Subordinated Notes 4.3090%
-
-
Other Debt
4.6950%
-
-
Total Sources
4,083.3
100%
Uses of Funds - 100%
Amount
% Total Uses
Target Equity Purchase [USD]
4,083.3
100.0%
Debt Repayment [USD]
-
-
Loan
-
-
Notes
-
-
Tender / Call Premiums
-
-
Fees [USD] -
-
Transaction Fees
-
-
Debt Financing Fees
-
-
Total Uses
4,083.3
100%
(Values in millions)
As can be ascertained from the above tables, the takeover of Telekom Austria by America Movil has been done through issue of new stock to the tune of $4,083.3 million. As can be seen from the above table of Source of Funds that no debt has been specially taken for the purpose of the takeover.
The whole amount of the funds raised through issue of new stock has gone towards the takeover of the target company i.e. Telekom America. No part of the $4,083.3 million has gone towards debt repayment of loans and notes or paying the transaction fees or the debt financing fees.
15. INTEGRATION ISSUES
AMX’s commercial reasons for the offer are mainly to facilitate greater operational co- operation and co-ordination between the América Móvil Group and the Telekom Austria Group, to exploit all areas for potential partnerships and to intensify the realisation of synergy potential for both group of companies. The Bidder and AMX aim to support to a greater extent Telekom Austria's plans in a rapidly changing environment in Europe
so that both companies benefit from their respective experiences in the sector. In this respect, AMX will explore existing and new opportunities to expand Telekom Austria's business, whereby growth in specific CEE countries shall exclusively take place via Telekom Austria.
The Bidder believes that the transaction could provide essential benefits to both the Telekom Austria Group and the América Móvil Group because:
a) AMX' focus on advanced telecommunication services and its global reach will provide a good opportunity for Telekom Austria to continue to remain competitive with a view to maintain its position as a leading operators in a highly competitive market environment to the benefit of Telekom Austria's customers;
b) AMX and Telekom Austria could benefit from sharing of marketing and innovation skills and knowledge;
c) AMX is committed to people development and training and sees many opportunities for the management and employees of both the Telekom Austria Group and the AMX Group as a result of a combination through best practice transfer, skill development and international career enhancement; and
d) Telekom Austria and its customers could derive benefits from being a part of an enterprise with significant access to technology on a global scale with a view to allow Telekom Austria to continue having access to state-of-art technology.
e) The capital increase will support Telekom Austria’s capital structure and financial position and will allow Telekom Austria to continue to invest in state-of-the-art infrastructure, research and development, innovation of products and services, amongst others, and to position Telekom Austria to benefit from investment opportunities arising in the countries in which it currently operates and in emerging markets in Central and Eastern Europe.
16. The Bidder believes that this will enable Telekom Austria to continue to compete in an even more increasing competitive market environment with competitors being often global players, in particular given the expected European wide consolidation of the telecom sector.
EXHIBITS:
1. FINANCIALS OF THE TARGET CO. (TC)
BALANCE SHEET In Millions of USD except Per Share FY 2010 FY 2011 FY 2012 FY 2013 12 Months Ending 2010-12-31 2011-12-31 2012-12-31 2013-12-31 Assets + Cash & Near Cash Items 160.7 596.1 792.8 277.6 + Short-Term Investments 170.5 215.1 112.3 13.6 + Accounts & Notes Receivable 1,032.2 918.0 991.2 943.0 + Inventories 200.8 204.4 201.8 175.5 + Other Current Assets 357.5 336.3 289.4 274.2 Total Current Assets 1,921.6 2,269.9 2,387.7 1,683.9 + LT Investments & LT Receivables 121.0 18.1 10.4 7.2 + Net Fixed Assets 3,407.0 3,191.0 3,202.2 3,182.7 + Gross Fixed Assets 16,239.6 15,791.6 15,212.5 15,492.8 - Accumulated Depreciation 12,832.6 12,600.6 12,010.3 12,310.1 + Other Long-Term Assets 4,649.6 4,174.7 3,977.0 5,964.3 Growth (YoY) -11.4 -10.2 -4.7 50.0 Total Long-Term Assets 8,177.5 7,383.8 7,189.6 9,154.2 Total Assets 10,099.1 9,653.7 9,577.3 10,838.1 Liabilities & Shareholders' Equity + Accounts Payable 907.2 832.3 779.7 791.3 + Short-Term Borrowings 677.2 1,314.4 1,384.9 317.5 + Other Short-Term Liabilities 932.4 979.3 899.9 879.9 Total Current Liabilities 2,516.8 3,126.0 3,064.5 1,988.7 + Long-Term Borrowings 4,131.6 3,803.8 3,737.4 5,153.9 + Other Long-Term Liabilities 1,476.7 1,579.3 1,694.5 1,609.7 Total Long-Term Liabilities 5,608.3 5,383.2 5,431.8 6,763.6 Total Liabilities 8,125.1 8,509.1 8,496.3 8,752.4 + Total Preferred Equity 0.0 0.0 0.0 0.0 + Minority Interest 3.4 1.2 1.4 1.5 + Share Capital & APIC 2,070.5 2,007.6 2,044.3 2,135.6 + Retained Earnings & Other Equity -99.8 -864.3 -964.7 -51.4 Total Equity 1,974.1 1,144.5 1,081.0 2,085.7 Total Liabilities & Equity 10,099.1 9,653.7 9,577.3 10,838.1
17. INCOME STATEMENT
In Millions of USD except Per Share FY 2010 FY 2011 FY 2012 FY 2013 12 Months Ending 2010-12-31 2011-12-31 2012-12-31 2013-12-31 Revenue 6,169.9 6,202.7 5,567.5 5,557.6 + Other Operating Revenue 118.3 139.8 105.5 115.7 - Operating Expenses 5,518.3 6,027.6 5,040.0 5,111.4 Operating Income 769.9 314.8 633.0 561.8 - Interest Expense 274.7 301.8 299.2 266.8 - Foreign Exchange Losses (Gains) 4.4 163.8 -1.1 12.8 - Net Non-Operating Losses (Gains) 170.2 203.5 20.7 29.7 Pretax Income 320.6 -354.3 314.3 252.5 - Income Tax Expense 61.6 -2.3 180.5 106.8 Income Before XO Items 258.9 -352.0 133.7 145.7 - Extraordinary Loss Net of Tax 0.0 0.0 0.0 0.0 - Minority Interests -0.2 -1.2 0.2 30.8 Net Income 259.2 -350.8 133.6 115.0 - Total Cash Preferred Dividends 0.0 0.0 0.0 0.0 Net Inc Avail to Common Shareholders 259.2 -350.8 133.6 115.0 Abnormal Losses (Gains) 189.0 325.4 45.2 60.3 Tax Effect on Abnormal Items -36.3 -81.4 -11.3 -15.1 Normalized Income 411.8 -106.8 167.5 160.2 Basic EPS Before Abnormal Items 0.93 -0.24 0.37 0.37 Basic EPS Before XO Items 0.58 -0.79 0.30 0.27 Basic EPS 0.58 -0.79 0.30 0.27 Basic Weighted Avg Shares 442.6 442.6 442.6 442.6 Diluted EPS Before Abnormal Items 0.93 -0.24 0.37 0.37 Diluted EPS Before XO Items 0.58 -0.79 0.30 0.27 Diluted EPS 0.58 -0.79 0.30 0.27
18. CASH FLOW STATEMENT
In Millions of USD except Per Share FY 2010 FY 2011 FY 2012 FY 2013 12 Months Ending 2010-12-31 2011-12-31 2012-12-31 2013-12-31 Cash From Operating Activities + Net Income 259.2 -350.8 133.6 115.0 + Depreciation & Amortization 1,413.6 1,811.9 1,239.5 1,148.5 + Other Non-Cash Adjustments 272.4 301.9 157.3 89.8 + Changes in Non-Cash Capital -91.2 -73.6 -182.9 43.5 Cash From Operations 1,854.0 1,689.4 1,347.5 1,396.8 Cash From Investing Activities + Disposal of Fixed Assets 14.6 6.9 7.3 14.3 + Capital Expenditures -1,013.0 -1,029.0 -936.4 -2,363.2 + Increase in Investments -390.7 -155.0 -985.9 -749.4 + Decrease in Investments 560.8 174.7 1,095.5 852.9 + Other Investing Activities 9.7 -187.7 1.3 -439.6 Cash From Investing Activities -818.4 -1,190.2 -818.2 -2,685.0 Cash from Financing Activities + Dividends Paid -440.3 -462.2 -216.3 -29.4 + Change in Short-Term Borrowings 41.0 -257.8 17.8 -13.5 + Increase in Long-Term Borrowings 99.5 1,051.6 1,078.1 1,381.8 + Decrease In Long-Term Borrowings -769.1 -312.0 -1,181.6 -1,238.3 + Increase in Capital Stocks 0.0 0.0 0.0 0.0 + Decrease in Capital Stocks 0.0 0.0 0.0 0.0 + Other Financing Activities -775.7 -45.8 -46.3 657.0 Cash from Financing Activities -1,844.6 -26.1 -348.2 757.6 Net Changes in Cash -809.0 473.1 181.1 -530.6
19. 2. FINANCIALS OF THE ACQUIRER CO. (AC)- AMERICA MOVIL
BALANCE SHEET In Millions of USD except Per Share FY 2010 FY 2011 FY 2012 FY 2013 12 Months Ending 2010-12-31 2011-12-31 2012-12-31 2013-12-31 Assets + Cash & Near Cash Items 7,767.9 4,244.4 3,519.5 3,677.6 + Short-Term Investments -- 0.0 0.0 0.0 + Accounts & Notes Receivable 7,543.2 8,971.7 4,375.5 4,536.4 + Inventories 2,111.7 2,451.0 2,220.4 2,803.7 + Other Current Assets 1,500.1 1,582.1 6,065.7 7,055.8 Total Current Assets 18,923.0 17,249.2 16,181.1 18,073.5 + LT Investments & LT Receivables -- 0.0 22.3 42.9 + Net Fixed Assets 33,343.9 33,459.7 38,720.1 38,263.0 + Gross Fixed Assets 39,312.2 43,184.4 72,586.1 73,596.3 - Accumulated Depreciation 5,968.3 9,724.7 33,866.0 35,333.3 + Other Long-Term Assets 18,716.5 17,175.6 21,258.3 22,662.1 Growth (YoY) 30.0 -8.2 23.8 6.6 Total Long-Term Assets 52,060.4 50,635.3 60,000.7 60,967.9 Total Assets 70,983.4 67,884.5 76,181.8 79,041.4 Liabilities & Shareholders' Equity + Accounts Payable 11,788.4 12,831.5 5,335.9 6,120.3 + Short-Term Borrowings 731.9 1,912.7 1,054.0 1,973.2 + Other Short-Term Liabilities 4,041.0 4,118.8 13,174.6 13,398.8 Total Current Liabilities 16,561.3 18,863.0 19,564.4 21,492.3 + Long-Term Borrowings 23,809.3 25,411.4 31,262.4 35,466.1 + Other Long-Term Liabilities 3,404.9 2,386.5 5,636.5 6,123.6 Total Long-Term Liabilities 27,214.2 27,797.9 36,899.0 41,589.7 Total Liabilities 43,775.4 46,660.9 56,463.4 63,082.0 + Total Preferred Equity 0.0 0.0 0.0 0.0 + Minority Interest 2,298.3 717.9 717.3 603.3 + Share Capital & APIC 7,807.9 6,921.8 7,459.9 7,360.2 + Retained Earnings & Other Equity 17,101.7 13,583.9 11,541.2 7,996.0 Total Equity 27,207.9 21,223.5 19,718.4 15,959.5 Total Liabilities & Equity 70,983.4 67,884.5 76,181.8 79,041.4
20. INCOME STATEMENT
In Millions of USD except Per Share FY 2010 FY 2011 FY 2012 FY 2013 12 Months Ending 2010-12-31 2011-12-31 2012-12-31 2013-12-31 Revenue 48,151.9 53,696.3 58,967.0 61,619.9 - Cost of Revenue 27,291.5 31,065.1 33,833.3 36,047.2 Gross Profit 20,860.4 22,631.2 25,133.8 25,572.6 + Other Operating Revenue -- -- 0.0 0.0 - Operating Expenses 8,794.1 10,139.3 12,873.5 13,488.2 Operating Income 12,066.3 12,491.9 12,260.2 12,084.4 - Interest Expense 1,368.9 1,678.1 1,895.5 2,379.0 - Foreign Exchange Losses (Gains) -442.2 1,807.5 -562.6 1,537.2 - Net Non-Operating Losses (Gains) 435.9 -1,368.5 456.3 -177.1 Pretax Income 10,703.6 10,374.8 10,471.1 8,345.2 - Inc tax & prof shrg 2,868.7 3,262.3 3,498.4 2,468.2 - L(G) on inflation -- -- -- -- Income Before XO Items 7,834.9 7,112.5 6,972.6 5,877.0 - Extraordinary Loss Net of Tax 0.0 0.0 0.0 0.0 - Minority Interests 616.5 425.4 50.3 27.4 Net Income 7,218.4 6,687.1 6,922.4 5,849.6 - Total Cash Preferred Dividends 0.0 0.0 0.0 0.0 Net Inc Avail to Common Shareholders 7,218.4 6,687.1 6,922.4 5,849.6 Abnormal Losses (Gains) -- -- 406.7 -464.2 Normalized Income 7,218.4 6,687.1 7,329.1 5,385.4 Basic EPS Before Abnormal Items 0.09 0.09 0.10 0.08 Basic EPS Before XO Items 0.09 0.09 0.09 0.08 Basic EPS 0.09 0.09 0.09 0.08 Basic Weighted Avg Shares 79,020.0 78,599.0 75,841.0 70,475.0 Diluted EPS Before Abnormal Items 0.09 0.09 0.10 0.08 Diluted EPS Before XO Items 0.09 0.09 0.09 -- Diluted EPS 0.09 0.09 0.09 0.08 Diluted Weighted Avg Shares 79,020.0 78,599.0 75,841.0 70,475.0
21. CASH FLOW STATEMENT In Millions of USD except Per Share FY 2010 FY 2011 FY 2012 FY 2013 12 Months Ending 2010-12-31 2011-12-31 2012-12-31 2013-12-31 Cash From Operating Activities + Net Income 7,218.4 6,687.1 6,922.4 5,849.6 + Depreciation & Amortization 7,214.3 7,586.5 7,880.7 7,959.0 + Other Non-Cash Adjustments 1,528.8 768.3 1,570.3 -331.2 + Changes in Non-Cash Capital 7.3 -903.7 -655.0 1,252.9 Cash From Operations 15,968.8 14,138.2 15,718.4 14,730.3 Cash From Investing Activities + Disposal of Fixed Assets 70.0 3.1 4.4 3.5 + Capital Expenditures -6,168.3 -9,700.8 -9,278.4 -9,282.3 + Increase in Investments 0.0 0.0 0.0 -942.2 + Decrease in Investments 0.0 0.0 0.0 0.0 + Other Investing Activities -2,815.2 -263.5 -5,761.5 -315.8 Cash From Investing Activities -8,913.5 -9,961.2 -15,035.5 -10,536.8 Cash from Financing Activities + Dividends Paid -1,362.0 -1,375.5 -1,170.5 -1,232.4 + Change in Short-Term Borrowings 0.0 -- 0.0 0.0 + Increase in Long-Term Borrowings 14,326.4 7,040.4 10,658.3 9,900.3 + Decrease In Long-Term Borrowings -11,795.2 -3,327.0 -7,406.7 -4,758.9 + Increase in Capital Stocks 0.0 0.0 0.0 0.0 + Decrease in Capital Stocks -1,437.8 -4,336.3 -1,357.0 -5,545.5 + Other Financing Activities -3,921.2 -5,149.9 -2,444.6 -2,347.2 Cash from Financing Activities -4,189.9 -7,148.3 -1,720.4 -3,983.7 Net Changes in Cash 2,865.4 -2,971.3 -1,037.5 209.8
2. VARIOUS IMPORTANT RATIOS OF TC & AC
Pro Forma Acquirer Target Aquirer
Diluted EPS
CY 2014E [USD]
Dil
-1.8%
0.09
0.36
0.09
P/E to Achieve Share Price
14.9x
25.3x
14.6x
Add'l Synergies to break even
161.8
CY 2015E [USD]
Dil
-1.2%
0.09
0.49
0.10
P/E to Achieve Share Price
13.8x
18.8x
13.7x
Add'l Synergies to break even
110.4
Net Leverage (Net Debt/TTM EBITDA)
+0.1x
1.7x
3.1x
1.6x
22. Equity Ownership by Target Holders
4.3%
3. MARKET REACTION OF THE DEAL (STOCK PRICE)
On Telekom Austria’s Stock Price:
On America Movil’s Stock Price:
23. 4. POST MERGER BALANCE SHEET
Standalone
Tango Alfa Adjustments Combined
2014:Q2 2014:Q2 + - 2014:Q2
Cash and Cash Equivalents
151.7
7,253.5
-
7,405.1 Short-Term Investments 15.6 - 15.6
Accounts Receivable
889.0
5,177.3
6,066.4 Inventories 171.0 2,369.0 2,540.0
Prepaids and Other Current Assets
301.5
6,342.7
6,644.1 Interbanking assets - - -
Net loans
-
-
- Total Current Assets 1,528.8 21,142.5 22,671.3
Property, Plant and Equipment, net 3,013.6 38,594.0 - 41,607.6
Long-Term Investment & Long-Term Receivables
8.2
58.5
66.7 Goodwill 1,618.8 7,353.8 3,581.8 - 1,618.8 10,935.6
Other Intangible Assets
3,571.7
2,931.3
-
6,503.1 Other Assets 225.5 12,124.6 12,350.1
Deferred Financing Fees
-
- Total Assets 9,966.6 82,204.8 94,134.4
Accounts Payable 631.8 5,552.3 6,184.1
Short-Term borrowings
1,102.6
3,966.0
5,068.6 Other Current Liabilities 868.8 14,918.0 15,786.8
Total Current Liabilities
2,603.2
24,436.3
27,039.4
Revolving Credit Facility
-
- Alfa Term Loan -
Tango Term Loan
-
- New Term Loan - -
Alfa Senior Notes
- Tango Senior Notes - -
New Senior Notes
-
- Senior Subordinated Notes - -
Other Debt
-
-
24. Deferred Income Taxes - -
Repos
-
-
- Customer deposits - - -
Long-Term Borrowings
4,222.7
35,061.3
39,284.0 Other Long-Term Liabilities 1,554.0 6,203.7 7,757.7
Total Liabilities
8,379.8
65,701.3
74,081.1
Total preferred equity
-
-
- Noncontrolling Interest 1.5 663.3 664.8
Shareholders' Equity
2,120.3
7,427.7
4,083.3
- 2,120.3
11,511.0 Retained earnings & Other Equity -535.0 8,412.4 7,877.4
Total Shareholders' Equity
1,586.8
16,503.4
20,053.2
Total Liabilities and Equity
9,966.6
82,204.8
94,134.4