KUALA LUMPUR: Axiata Group Bhd and its wholly-owned telecommunications tower unit edotco Group Sdn Bhd are raising up to US$600 million (RM2.65 billion) via private placement to Innovation Network Corp of Japan (INCJ) and Khazanah Nasional Bhd.
Axiata announced yesterday that the group and edotco have entered into a binding term sheet with INCJ and Khazanah.
In a press conference, edotco chief executive officer (CEO) Suresh Sidhu said that of the total US$600 million placement, INCJ has committed to subscribe to up to US$400 million worth of primary shares, while Khazanah committed to subscribe to up to US$200 million worth of existing shares held by Axiata.
“Firstly for INCJ, we issue new shares to them as [a] new investor, so that expands our capital base, and that cash is available for edotco to use; for Khazanah, Axiata is selling some existing shares and that cash will go to Axiata for its purposes,” he said.
“New shares issued to INCJ are just like those owned by Axiata; there are no promised rates of return or anything of that nature. There is also no required time frame for an IPO (initial public offering); it is up to the health of the business at the right point in time,” he added.
Suresh said edotco has agreed with the investors that the governance principles will replicate that of Bursa Malaysia guidelines in terms of number of independent directors on the board and committee members, almost as if it is a listed company.
Suresh also revealed that both will get a seat each on edotco’s board.
INCJ is a Japanese public-private investment company that provides financial, technological and management support for next-generation businesses.
Suresh said the definitive agreements are expected to be finalised and signed at end-January next year, and the group will retain its majority stake in edotco.
However, Suresh said the pro forma shareholding structure after the corporate exercise is not available currently.
“The final number could be less than the [announced] number. So when the transaction closes and shares are issued in January, then we will be able to disclose the final shareholding,” he said.
“It is easier to announce in January with all the final numbers, [but] because the term sheets we have exchanged with these parties are binding, what’s required is to announce then immediately as per our Bursa listing requirements for Axiata,” he explained.
Suresh said while the commitments by INCJ and Khazanah are binding, it is actually up to Axiata and its board to decide how much to take at the end of the closing date.
“There is no shift in the commitment. If the full amount is called upon, then the full amount will be provided. It is just an internal process to agree what is the actual amount; that is part of the definitive document closure and signing,” he said.
Suresh also said there are no plans for an IPO for edotco during 2017, and the management would only look at the plan at the earliest from late 2018.
He added that INCJ will remain as a financial partner with no management role.
Commenting on the deal, which is the largest global tower-sector private equity placement in 2016, Axiata president and group CEO Tan Sri Jamaludin Ibrahim said the group will utilise proceeds raised from edotco’s share sale to pare down Axiata’s US dollar-denominated borrowings.
As at the third quarter ended Sept 30, 2016, Axiata’s US dollar-denominated borrowings amounted to US$1.6 billion, of which 47% was hedged.
After the exercise, Jamaludin said Axiata’s gross debt to Ebitda will be reduced to below 2.5 times.
“Whatever it is, we will still be [a] more than 50% owner of this company (edotco), and for the foreseeable future, we will maintain at least 50% of this company. This is strategic for us in terms of growth and dividend in future; we will retain management control,” he said.