Weather wins battle for Wind

THE WEATHER consortium led by Egyptian telecom magnate Naguib Sawiris would appear to have won the battle for control of Wind, the Italian telecommunications group, in a US$15.7 billion deal. The move will be Europe’s largest-ever leveraged buyout.

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By  Rhys Jones Published  April 17, 2005

THE WEATHER consortium led by Egyptian telecom magnate Naguib Sawiris would appear to have won the battle for control of Wind, the Italian telecommunications group, in a US$15.7 billion deal. The move will be Europe’s largest-ever leveraged buyout. Sawiris, the chairman and chief executive of Orascom Telecom Holdings, Egypt’s largest phone company, edged out a group of investors led by the private equity firm Blackstone Group, whose offer was valued at around US$15.4 billion. Joining Sawiris in his offer is IPI-Ross, an investment vehicle formed by American buyout specialist Wilbur L. Ross and French investor Philippe Nguyen. Wind’s parent company, the power firm Enel, said last week that its board had considered both offers and planned to enter into exclusive talks with Sawiris’s group. The Enel board said it hoped to “better define some elements of the offer” before beginning the talks. Barring any unexpected circumstances, a deal could be signed as soon as the end of April, with Wind changing hands this summer. Eventually, Wind’s assets are expected to become part of Orascom. But that may take several years because Wind is losing money and has a high debt load. A deal is not guaranteed, but Enel has indefinitely postponed its plans to spin-off Wind, which currently has 28 million customers, in an initial public offering, with a view to getting a deal done with Weather instead. However, the potential transaction’s importance would stretch far beyond the company’s presence in Italy. Sawiris wants Wind, Italy’s second-biggest fixed-line phone company and third ranked wireless company, so he can create a pan-Mediterranean telephone company. Sawiris said combining Orascom with Wind “would provide a lot of stability” after the company’s debt is reduced. “The equity portion will be between US$1.9 billion to US$2.6 billion,” he added. Wind’s 2004 loss, before interest and tax, narrowed to US$592 million from US$1.1 billion in 2003 as it added customers to its mobile-phone service and cut costs, Enel said in a statement last week. Sales rose 7.6% to US$6.1 billion as the company added about 2.1 million mobile customers. Wind, which trails Telecom Italia in the Italian fixed-line telephone market, was US$8.7 billion in debt at the end of 2004. However, by keeping a stake of at least 37% in Wind, Enel will be able to avoid taxes it would otherwise have had to pay on the sale of the entire business. Orascom is already present in eight markets including Algeria, Egypt and Tunisia, but the Wind deal represents a real breakthrough for Italy. The possibility that “something as important as telecommunications could go into private hands in such a politically sensitive country shows that attitudes are changing”, said Ross. “Five years ago, a transaction this size would have never gotten this far in Italy,” he added. The Sawiris group’s bid is its second, after Enel rejected an offer in December. Shares of Orascom, which has more than 8 million subscribers, have gained 63% this year, giving the company a market value of US$7.86 billion on the CASE Index in Cairo.

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