Telindus’ board has unanimously rejected a takeover bid from Belgacom.
Belgacom’s bid looked to be in trouble almost from the start. Market sentiment deemed the offer too low, despite the fact that Belgacom said it was willing to pay E13.50 ($16.23) per share for Telindus, a 16% premium on Telindus’ share price when trading was suspended.
Now Telindus’ board has unanimously rejected Belgacom’s offer, claiming that it does not reflect Telindus’ value potential.
Bear Stearns believes that Belgacom is in something of a no-win position. Making another bid for Telindus would be deemed negative, but likewise walking away would make the company appear unable to follow through on its acquisition bids.
Belgacom is a cash-rich operation, especially after it raised E3.6 billion ($4.33 billion) in a listing in March 2004, which turned out to be Belgium’s largest ever IPO. For H1 2005, the operator posted a 54% rise in net income to E780 million ($961 million), up from E506 million ($623 million) in the year-ago period.
However, a little digging reveals that the dramatic rise in profits was helped by gains from selling some businesses, namely the Expercom prepaid phone card business and the rights to an annual fee from its directory services unit. Like many other telecom operators, the Brussels-based carrier is facing declining growth in its fixed-line and mobile operations, and is therefore increasingly reliant on broadband to drive future sales growth. It is also known to be looking for acquisitions in emerging markets.
Belgacom is certainly not alone in wishing to expand its services capabilities. Many operators believe that building up their capabilities in areas such as data network management and integration, managed security services and IT infrastructure management offer a way to build up profitability while offsetting the decline of revenue from traditional voice services.
There has been a growing number of mergers between telecoms operators and IT services vendors recently. Computer Business Review has tracked 13 takeovers of services companies by operators in the last 18 months, with a total value of more than $2.6 billion.
