KUALA LUMPUR (Dec 11): Axiata Group Bhd (KL:AXIATA) has signed a definitive agreement with Sinar Mas to proceed with the proposed merger of PT XL Axiata Tbk (XL Axiata) and two other companies in Indonesia. 

The merged entity will be named PT XLSmart Telecom Sejahtera Tbk (XLSmart), where Axiata and Sinar Mas will remain as joint controlling shareholders with a 34.8% ownership stake each. Public shareholders will hold the remaining 30.4%.

The merger involves the effective transfers of PT Smartfren Telecom Tbk (Smartfren) and Smartfren’s subsidiary — PT Smart Telcom (SmartTel) — to XL Axiata, where XL Axiata will issue 5.07 billion new ordinary shares at an issue price of 2,350 rupiah (65.57 sen) per share to acquire the entities, for a total purchase consideration of 11.917 trillion rupiah (RM3.325 billion).

XLSmart, the merged entity, will continue to be listed on the Indonesia Stock Exchange (IDX), according to Axiata in a filing with Bursa Malaysia. 

To achieve the joint controlling shareholdings of Axiata and Sinar Mas, the deal will also see Axiata Investment (Indonesia) Sdn Bhd dispose of 2.38 billion shares in XLSmart to PT Bali Media Telekomunikasi (BMT) — a substantial shareholder of Smartfren — for a cash consideration of US$475 million (RM2.10 billion).

Axiata said it intends to use the US$475 million arising from the shareholding equalisation to primarily pare down debt.

"At transaction closing, the group will receive US$400 million, along with an additional US$75 million at the end of the first year, subject to the satisfaction of certain conditions," said Axiata in a separate statement on Wednesday.

"Additionally, by continuing to own shares of XLSmart, Axiata shareholders will have the opportunity to capture synergies and participate in the new company’s long-term value creation potential," the group said.

XLSmart will combine Axiata’s regional expertise and deep experience in managing integrated operations with the local knowledge and established presence of Sinar Mas, creating a larger, financially robust organisation, Axiata added.

The merged entity aims to deliver seamless connectivity, innovative digital solutions, and investing in future technologies such as 5G, artificial intelligence, cloud-based services, and cyber resilience.

XLSmart will serve a combined mobile subscriber base of approximately 94.51 million, representing around 27% of the local market share, read the statement.

"This expanded scale will support combined pro forma revenues of 45.41 trillion rupiah and earnings before interest, taxation, depreciation and amortisation (Ebitda) of 22.42 trillion rupiah, providing a solid financial foundation for reinvestment into profitable growth and yield," added Axiata.

Upon completion, Axiata will operate in the market with a three-player structure, where the group holds an over 25% market share.  

"Following the completion of the merger, XLSmart will join a high-value creation Indonesian portfolio of four other businesses — Link Net, Edotco, Boost, and ADA," said Axiata.

The merger is subject to approval from the Ministry of Communications and Digital Affairs of the Republic of Indonesia, as well as the continuation or reissuance of all spectrum assignments and licences held by Smartfren and SmartTel to XL.

The other consents required include approval by shareholders of the incumbent parties, approval from Bank Negara Malaysia pertaining to investment in foreign currency assets, issuance of an effective statement from the Indonesian Financial Services Authority (OJK), as well as approval from the IDX on the listing of the new issuance of shares by XL Axiata.

Shares of Axiata Group were suspended from trading from 9am on Wednesday. The counter last closed at RM2.37, giving it a market capitalisation of RM21.76 billion. The stock is slated to resume trading on Thursday.

At the time of writing, XL Axiata’s shares fell 1.3% to 2,260 rupiah per share, giving it a market capitalisation of 29.67 trillion rupiah (RM8.29 billion).

Read also:
Axiata shares suspended amid reports of merger in Indonesian operations
Axiata, Sinar Mas said to near deal for Indonesian units — Bloomberg