KUALA LUMPUR: Axiata Group Bhd’s wholly-owned subsidiary, edotco Group Sdn Bhd, has exercised a call option to increase its effective holdings in edotco Myanmar Ltd to 87.5% from 75%.
The additional 12.5% stake will cost Axiata US$35 million (RM147.35 million), to be settled by cash.
This values edotco Myanmar at US$280 million, 68.7% higher than the US$166.7 million implied valuation of the company when Axiata paid US$125 million for a 75% stake almost one year earlier.
“The increase in valuation simply reflects an increase in the Ebitda (earnings before interest, taxes, depreciation and amortisation) of edotco Myanmar. The exercise price of the options is calculated based on a formula that uses a multiple of the Ebitda; a multiple similar to the one used in the initial acquisition,” edotco Group’s chief executive officer, Suresh Sidhu, told The Edge Financial Daily.
Recall that edotco Group through its wholly-owned subsidiary, edotco Investments (Labuan) Ltd, acquired a 75% stake in edotco Investments Singapore Pte Ltd (formerly known as Digicel Asian Holdings Pte Ltd) from YSH Finance Ltd on Dec 4 last year for US$125 million. This translated into an enterprise value of RM221 million.
edotco Singapore wholly owns edotco Myanmar (formerly Digicel Myanmar Tower Company Ltd), while YSH Finance is controlled by Singapore-listed Yoma Strategic Holdings Ltd.
As part of the acquisition last year, edotco Investments entered into a put and call option agreement with YSH Finance for the sale and purchase of the remaining 25% stake in edotco Singapore. If Axiata fully exercised the call option, it would take full control of edotco Singapore and edotco Myanmar.
However, edotco Investments is only exercising half the call options. Note that the put and call option agreement will also be terminated once Axiata completes the acquisition of the 12.5% stake in edotco Singapore.
Axiata has the first right of refusal for the remaining 12.5% stake, which will be transacted on a willing buyer, willing seller basis, said Suresh.
The option was to expire five years from signing. It fixed the exercise price of the 25% stake at the higher of US$40.25 million or the future enterprise valuation based on a pre-agreed multiple of edotco Myanmar’s trailing 12-month Ebitda.
In the filing with Bursa Malaysia, Axiata also noted that the acquisition price of the 12.5% stake also took into account the assignment and transfer of outstanding loans advanced by YSH Finance to edotco Singapore.
Axiata shares rose 0.21% to RM4.81 yesterday. At current level, they are valued at 21.96 times historical earnings, with a market capitalisation of RM42.9 billion. Year to date, the stock has fallen 24.96%.