BT’s proposed £12.5 billion takeover of EE, the UK’s largest mobile operator, received the backing of the fixed incumbent’s shareholders, but will have to wait longer for the judgement of the country’s competition regulator.
An overwhelming proportion (more than 99 per cent) of votes cast at a general meeting yesterday were in favour of the deal, which BT has sold as generating significant value for shareholders. A similar resounding majority backed a share buyback of BT shares from Deutsche Telekom and/or Orange.
However, the deal must now face the scrutiny of the UK’s Competition and Markets Authority (CMA). BT reckons if the deal gets a green light at so-called Phase 1 of the CMA’s procedure then deal completion will be by end-September 2015.
However, if the process goes into Phase 2 then the completion date will be by end-March 2016, the same date mentioned in early February when BT and EE agreed definitive terms.
The CMA is already studying several areas that could feel the force of a BT-EE combination, which would be the UK’s leader in both fixed and mobile broadband. These include wholesale (mobile backhaul) and retail (mobile, fixed voice, broadband, as well as bundled services such as triple and quadplay).
However, the welcome for the deal among shareholders has been unambiguous. BT management is promising free cashflow gains in the first full year post completion, as well as £3 billon in opex and capex synergies and £1.6 billion revenue synergy (both at net present value, or NPV). The BT-EE combination would hold an “attractive” valuation of six times Ebitda, said the fixed incumbent.
It is anticipated that more than half (£6.8 billion) of the £12.5 billion asking price will come from new shares issued at closing (12 per cent to Deutsche Telekom and 4 per cent to Orange). A further £1 billion will come from the equity placing made by BT in February 2015. And EE’s net debt will contribute £2.3 billion. Finally, existing cash and new net debt will deliver £2.4 billion.