Axiata Group Berhad, Telenor Asia Pte Ltd and Digi.Com Berhad announced that they have successfully concluded the due-diligence exercise and signed the Transaction Agreements for the proposed merger of Celcom Axiata Berhad (“Celcomâ€) and Digi (together “MergeCoâ€).
Following the 8 April 2021 announcement that Axiata and Telenor were in advanced discussions on the proposed merger, the signing today signifies a confirmation of the intent to establish a commercially stronger and more resilient digital converged service provider, and leading Malaysian telecom operator positioned to drive Malaysia’s digital ambitions.
On a pro forma basis1, MergeCo will serve an estimated 19 million customers with revenue of RM12.4 billion, EBITDA of RM5.7 billion, Profit After Taxation of RM1.9 billion and Free Cash Flow2 of RM4.0 billion.
Axiata and Telenor will be equal partners with 33.1 percent ownership stake each in MergeCo, and MergeCo will continue to be listed on Bursa Malaysia Securities Berhad (“Bursaâ€). Targeted to be among the five largest companies listed on Bursa in terms of market capitalisation, MergeCo is valued at a combined pre-synergy equity value of close to RM50 billion3.
The integration planning phase will include further detailed work on synergies and business plan of MergeCo, and initial estimates indicate potential value accretion through cost and capex synergies of around RM8 billion on a net present value basis.
MergeCo will aim to make an investment of up to RM250 million over five years in building a world-class Innovation Center to be established in Kuala Lumpur with the aim to catalyse the 4IR digital transformation, strengthen the local ecosystem and keep Malaysia at the forefront of the global digital evolution.
In taking advantage of new opportunities in the digital economy, the Innovation Center will conduct extensive research and development, develop 5G use cases, support local digital startups, and provide a platform to nurture the creation of a knowledge-based workforce in line with the MyDIGITAL aspirations.
At completion, the merger of Celcom and Digi will result in Axiata receiving newly issued ordinary shares in Digi, representing 33.1 percent of the enlarged issued share capital of Digi, cash consideration of RM2.0 billion of which approximately RM1.7 billion will come from Digi as debt in MergeCo and approximately RM300 million from Telenor as part of an ownership equalisation under the terms of the proposed merger.
Completion of the transaction will be subject to the approval of both Axiata and Digi shareholders, regulatory approvals and other customary terms and conditions. Barring unforeseen circumstances, the Proposed Merger is expected to be completed by the second quarter of 2022. ■