By Farah Atia
Shares of Orascom Telecom Holding dropped the most in six months after an announcement made by Altimo’s Mikhail Fridman that he will not acquire a 16% stake in the mobile phone company.
The Egyptian Financial Supervisory Authority (EFSA) had rejected Altimo’s request to go forth with purchasing this stake, after Fridman’s 70 cent-per-share offer failed to secure the approval of 26.16% of Orascom’s holders, which he had stipulated to resume the deal. Only 16% agreed to that offer.
Orascom Telecom shares dropped 2.6% to 4.58 EGP at close on Monday, adding to the week’s decline which had made it the biggest loser on the EGX 30 index on Monday. The fall in the stock’s price had a slight effect on the index which fell by 1.29%. Other heavyweight stocks in the index offset Orascom Telecom’s decline.
“The drop is reasonable after Altimo’s statement of having no plans to launch a new offer at the moment,” said Ahmed Adel, telecom analyst at Naeem brokerage. “Investors were optimistic and had high expectations for a higher offer. Still, remember that Altimo’s statement is not legally binding and it could always change its strategy and make a revised offer,” he said.
Adel said the buyout offer’s withdrawal might not be final. “If Altimo still has intentions to delist Orascom Telecom from Egypt or take advantage of any expected Djezzy settlements (as speculated), further offers at a good price cannot be completely ruled out,” he said. “However, Altimo isn’t authorised to make another offer within the next six months under the same investment vehicle, its subsidiary Baskindale, but this could be made possible through another investment arm.”
Fridman’s persistence cannot be overlooked, according to Adel. “Altimo’s request to waive the conditional 26.16% and buy the tendered shares made it clear that Altimo was trying to buy as much as it can in Orascom Telecom, at a reasonable price and as soon as possible,” Adel stated.
“The reaction alongside the offer’s timing being contentious indirectly implies an opportunistic move ahead of a positive outcome in Algeria.”
Analysts still see the coming period as positive for shareholders. “Even if Altimo decides not to make another offer with a higher price, there will still be an upside potential to shareholders when a resolution in Algeria ultimately materialises,” Adel explained. “When the Djezzy situation is resolved, shareholders gains would surpass the current offer price.”
According to Adel, “by making the offer in the first place, Altimo already created a strong support-level indicator vis-a-vis the current market price, indirectly implying a win-win situation to remaining shareholders.”