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Presentation to the Capital Market 2009 Financing of the Transaction for the Acquisition of Partners Control Core.

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Presentation on theme: "Presentation to the Capital Market 2009 Financing of the Transaction for the Acquisition of Partners Control Core."— Presentation transcript:

1 Presentation to the Capital Market 2009 Financing of the Transaction for the Acquisition of Partners Control Core

2 Forward-looking Information This presentation does not constitute an offer for the purchase or sale of securities of the Company or an invitation to receive bids as stated, and its sole intent is to furnish information. This presentation was prepared by Scailex Corporation Ltd. (the Company). The information contained in this presentation and all other information that shall be conveyed during the presentation of the presentation (the Information) is being presented solely for the sake of convenience. The Information does not constitute a basis for making investment decisions, does not constitute a recommendation or opinion, and should not substitute for a potential investors sound judgment. That stated in this presentation and all matters pertaining to the analysis of the Companys operations is merely a summary. To obtain a complete picture of the Companys operations and of the risks with which the Company is contending, the Companys detailed reports to the Israeli Securities Authority and to the Tel-Aviv Stock Exchange should be scrutinized. The Company is not responsible for the completeness and accuracy of the Information and shall not bear any liability for any damages and/or losses that are liable to be caused as a result of use of the Information. In any case, that stated in the Companys books and/or official publications prevails over any Information contained herein. This presentation contains forward-looking information, as this term is defined in the Securities Act, about forecasts, objectives and assessments, estimates and other information relating to future events and/or matters, the achievement of which is not certain and is not under the Companys control. Forward-looking information does not constitute a proven fact and is based solely on the Companys subjective assessment. The principal facts and data that were used as a basis for this Information are facts and data pertaining to the current position of the Company and of Partner and of their businesses, facts and data concerning the current situation of the operating segments in which the Company and Partner are engaging in their regions of activity, and macro-economic facts and data, all of which are as known to the Company at the time that this preparation was prepared. The forward-looking information included in this presentation is based, to a significant extent, in addition to information in the Companys possession, on the Companys current expectations and assessments about future developments in each of the said parameters, and on the interactions between such developments. The realization or non-realization of the forward-looking information will be influenced, inter alia, by risk factors that are characteristic to the Companys operations, and by developments in the general environment and in those external factors that affect the Companys operations, which cannot be pre-assessed and are not under the Companys control. There is no certainty that the Companys expectations and assessments will indeed materialize, and the results of the Companys operations are liable to materially differ from the results assessed or implied in the forward-looking statements, inter alia, due to a variance in any of the above factors. Therefore, the readers of this presentation are hereby cautioned that the Companys actual results and achievements in the future are liable to materially differ from those presented in the forward-looking information presented in this presentation. Furthermore, the forward-looking forecasts and assessments are based on data and information in the Companys possession at the time that this presentation was prepared and the Company is not undertaking to update and/or revise any such forecast and/or assessment so as to reflect events and/or circumstances that shall transpire subsequent to the preparation of this presentation.

3 Scailex today Partner today The Partner transaction and the day after Structure of the offer What does this presentation contain? 3

4 Vision To be the leading communications entity in Israel, supplying a full range of communications solutions, by developing the existing brand and expanding the brand into additional sectors, while deepening our ties with the community. 4

5 Scailex Today 5

6 Structure of the Group 86.46% 42%-43% 6 0.95% Scailex Corporation Ltd. (TASE) Scailex Corporation Ltd. (TASE) Mr. Ilan Ben-Dov Suny Electronics Ltd. Partner (NASDAQ/TASE)Partner Dynamica Cellular

7 1971 – Scitex Corporation was founded 1980 – Floated on the NASDAQ in the United States 2001 – Registration for trading on the Tel-Aviv Stock Exchange 2000 – 2006 – Sale of all operations pertaining to printing and digital preprinting 2008 – Acquisition of Scailex by Suny, upon which, Suny transferred to Scailex the importing and marketing operations of Samsung equipment to the cellular operators, and Dynamicas operations (retail chain for sales to Cellcoms end-customers). 2009 – – Signing of the agreement for the acquisition of some 51.3% of Partners shares from the Hutchison Group – – Signing of an agreement for the sale of 4.99% of Partners shares to Bank Leumi for the inclusive sum of approximately NIS 515 million. The Company is conducting negotiations with additional entities for the sale of up to an additional 3% of Partners shares. Major Milestones 7

8 Ilan Ben-Dov – Chairman of Scailexs Board of Directors – – 15 years in the telecom sector – – Founder, Chairman and C.E.O. of Suny Telecom and Dynamica Jacob Gelbard - Consultant – – C.E.O. of Bezeq and Pelephone for seven years – – C.E.O. of Blue Square for seven years Yahel Shachar – C.E.O. of Scailex – – Three years as C.E.O.; before that, Scailexs C.F.O. for four years – – V.P. Investments at BVR Technologies (NASDAQ) for three years Scailexs Board of Directors – – Dr. Arie Ovadia - private fund manager, director in public companies; formerly the chairman of the Israel Phoenix Insurance Company – – Shalom Singer – businessman; formerly, the C.E.O. of the First International Bank of Israel; Director-General of the Ministry of Finance – – Iris Beck – C.E.O. of McCann Erickson; formerly, V.P. Marketing of Partner – – Dror Barzilai (external public director) – director in public companies; formerly, the C.E.O. of Nestle Ice Creams – – Yoav Biran – formerly, Director-General of the Ministry of Foreign Affairs and the Israeli Ambassador to the U.K. – – Yechiel Feingold – C.F.O. of public companies Management Team of leading executives 8

9 Key Financial Data (in NIS millions) 9 Q2/09H1/09 Income254481 Net profit96158 Cash flow2568 Cash and financial assets (including working capital) 950 Total balance sheet1,261 Equity1,152 1. The cellular operators segment (Samsung) generates a net annual profit of at least NIS 100 million. The assets of the cellular operators segment are presented in the balance sheet at the sum of about NIS 311 million. 2. The Company has losses for tax purposes of some NIS 1.8 billion, out of which, a tax asset is presented in the balance sheet of some NIS 35 million.

10 10 SCAILEX SAMSUNG OPERATIONS * The data are correct to Q2/09 Key Financial Data Key Financial Data (in NIS millions) Q4/08Q1/09Q2/09 Operating profit245891 Net profit6261.596 Operating profitNet profit Q4/08Q1/09Q2/09 EBITDA263125

11 Partner Today 11

12 Key milestones – activities: 1998 – receipt of a license from the Ministry of Communications 1999 – start of commercial operations 2004 - launch of 3G handsets 2006 – acquisition of Med-1, a data transmission network based on optic fibers, and the receipt of a data transmission license 2007 – receipt of a license from the Ministry of Communications for domestic landline communications 2008 – launch of the largest entertainment portal in Israel, Orange Time, and broadband internet services Highlights: Traded on the NASDAQ and the Tel-Aviv Stock Exchange according to a market value of NIS 10.8 billion. Assessed market share of 31.4% Highest revenue per user; leading in revenues from data and content Some 3 million customers Professional and efficient customer service Growth strategy geared towards activities in new markets: VoB, ISP and other means of communication Partner – Business Card

13 H1/09 (NIS millions) H1/09 (NIS millions) 3,1692,926Income 1,5391,156Gross profit 881868Operating profit 622584Net profit 1,2301,126EBITDA 4121,892Equity 4,0572,455Net debt 1.651.09Ratio debt/EBITDA 14,38612,775Evaluation Partner v. Cellcom – Financial Data * Based on the financial statements of Partner and Cellcom for Q2 2009. and RBC analysis reports

14 The Transaction and the Day After 14

15 Scailex shall acquire the entire holding of Partner being sold Concurrent with the acquisition, Scailex shall sell about 8.4% of the Partner shares being acquired to institutional entities at the same price as Scailexs purchase price, plus a convertible bond in Scailex. Purchase price – NIS 67.025 per share (shekel price) + LIBOR interest until the closing of the transaction Forecasted closing of the transaction – about 3 months; incentive to Scailex to close before the 1 st of December As is transaction (no representations), subject to suspending conditions and agreed compensation in the event that the transaction is not closed Main suspending conditions to the transaction: –Approval of the Antitrust Commissioner –Approval of the Ministry of Communications –Approval of Hutchisons general assembly 1 2 Key Points of the Transaction 15

16 16 On the Transaction Execution Date: 30% of the shares are pledged 13% are free shares 43% of Partners shares are held by Scailex Cash balance in Scailex – NIS 220 million Sellers loan + dividend by year-end 2010 Scailex cash Sale to partners Financing against existing operations BondPledge Sources for the transaction 926Equity 865Sale to partners 250Financing against operations 11%1,150Recognized financing 3,291TOTAL 13%1,300Short-term loans* 4,591TOTAL 6%800Bond balance 5,291Total financing

17 Recognized financing Volume – USD 300 million (some NIS 1,150 million) Redemption of the principal – 4.5 years (bullet payment) Interest – bi-annual in USD – 2% - with 100% collateral of Partner shares (not adjusted) – 3% - with 75% collateral of Partner shares (not adjusted) – 4% - with 50% collateral of Partner shares (not adjusted) – Alternatives are at Scailexs discretion (the debtor) Hutchison is not entitled to a dividend Upon repayment of the debt to the seller, the Company will repay its assessed debt to the bondholders 17 Key Points of the Transaction (3)

18 One of the two leading companies in the cellular telecom market Excellent platform for establishing a leading telecom entity in Is Excellent platform for establishing a leading telecom entity in Israel – –Increase of the Companys market share in the cellular sector in Israel, focusing on the rapidly-growing data segment – –Development in existing segments: internet, landlines, content – –New directions: multi-channel TV (IPTV), international calls Partner holds the Number One cellular brand in Israel Orange for the last 7 years Partner holds the Number One cellular brand in Israel Orange for the last 7 years (according to the Globes Brands Index) Partner holds the Number Two brand of all brands in Israel, Orange, with a brand value of NIS 2 billion Partner holds the Number Two brand of all brands in Israel, Orange, with a brand value of NIS 2 billion (according to the Globes Brand Index for 2009). (Coca Cola is the number 1 brand) Excellent management – Top Ranking for the last two years Excellent management – Top Ranking for the last two years (according to the Calcalist) Why Partner? 18

19 Sources for the Transaction Sources for the Transaction 19 43% 600Straight bond 200*Convertible bond 1,300 Short-term bank financing 250 Financing backed by operations 1,150Recognized financing 926Equity 4,426 Total financing required 865Sale to partners 5,291Total * Includes convertible bond option to partners Financing of the transaction Post-transaction pledges Straight bond Convertible bond Short-term bank financing Financing backed by operations Recognized financing Equity Sale to partners Publicly-held shares Sale to partners Free Partner shares Pledged against recognized debt Pledged against bank debt Pledged against bonds

20 Partners operations – –Partners profitability will be sustained – NIS 1.1 billion per annum – –Regulatory changes, if any, will begin to have an impact as of 2011 – –Partner will continue to distribute a quarterly dividend to its current shareholders – –Ratio of debt/EBITDA – Partner 1:1.1, compared with Cellcom 1:1.7. The accepted ratio for communications companies is at least the Cellcom ratio (and more - 1:2). The existing ratio in Partner will enable the company to increase its debt by another NIS 1.5 million before it reaches Cellcoms ratio Debt servicing at the level of Scailex – –About NIS 1.3 million of the entire debt is expected to be repaid already during the first 18 months (from 2009 and 2010 dividends) – –As of the second year – the flow from Partner of some NIS 500 million and from the Samsung operations, of some NIS 100 million, will service the debt (in addition to the financial activity) Scailexs operations – –Scailexs profitability (import and marketing of Samsung handsets) will be sustained – NIS 100 million – –Dynamica (cellular retail operations for Cellcom) might have to be sold Basic Assumptions for Debt Servicing in Scailex 20

21 Financing of the Transaction 21 Net debt (year end) (the trend line presents the value of the shares pledged against the debt (as per the transaction price) Debt service (principal and interest) * Assuming the sale of some 8.4% of Partners shares after the closing of the transaction NIS millions Operations-backed debt Straight bondDebt interest Recognized debt Bank financing Convertible bond Straight bond Operations-backed debt Bank financing Recognized debt Pledged shares

22 Forecasted Sources and Uses * Flow from current operations and flow from the sale of Dynamica (if necessary) ** Assuming a change in Partners debt to EBITDA ratio during 2010 to 1:1.5. 22 In NIS thousands*2009201020112012201320142015 Investment(4,425) New debt (including sellers loan 3,500 Current operating flow200*100 Dividend (Partner)1201,075**470 Total sources(605)1,175570 Repayment of principal and interest, net (10)(1,095)(435)(195)(165)(1,350)50 Net flow(615)80135375405(780)620 Cash balances at the end of the period 3354155509251,3305501,170 Debt balance (bank + bond) 2,1001,060650450250 Balance of free shares13.3%23.2%27.4%29.4%31.3%42.9% Value of free shares1,3702,4002,8303,0253,2254,425

23 201420132012201120102009In NIS thousands (254)(209)(215)(171)(22)(2)Bond service (principal + interest) -50250450600 Closing balance (after bond service) Straight bond -200 Convertible bond -50250450600 Value of shares pledged against bond debt 4,4253,2253,0252,8302,4001,370Value of free shares 5501,330925550415335Cash balance at end of period 23 Closing balance – convertible bond Closing balance – straight bond Closing balance – cash Value of free shares Value of shares pledged against bond debt Bond Details

24 Fixed-interest shekel bonds (some NIS 150 million): – –Average duration of 3.1 years; principal and interest payments – 2011-2014 in six biannual payments – –Pledge of Partner shares at 100% of the bond principal according to the value on the offer date, with a price adjustment for a dividend beyond the current profit Variable-interest shekel bonds (some NIS 150 million): – –Average duration of 2.9 years; principal and interest payments – 2011-2013 in six biannual payments – –Margin above the interested quoted in Gilon – –Pledge of Partner shares at 100% of the bond principal according to the value on the offer date, with a price adjustment for a dividend beyond the current profit Index-linked bonds (some NIS 150 million): – –Average duration of 2.9 years; principal and interest payments – 2011-2013 in six biannual payments – –Margin above the interested quoted in Gilon – –Pledge of Partner shares at 100% of the bond principal according to the value on the offer date, with a price adjustment for a dividend beyond the current profit Convertible bonds (~ NIS 50 million to public; option to partners of ~ NIS 150 m): – –Bond for 15 years + option to redeem after 5 years, average duration of 4.5 years – –Biannual payments of shekel interest; the tender is on the unit price Structure of the Offer 24 * The data in this slide are an assessment – the structure is not final.

25 Scailex possesses high financial strength, which has consistently sustained profitable operations over the years. Financial strength is improved subsequent to the acquisition transaction, based on the flows, which should generate some NIS 600 million/annum. Highly experienced, leading management team. Stable collateral – Partner shares – first time in Israel! Loan repayments – short average duration – when the bond repayments begin, the debt balance (excluding the debt to the seller) will be NIS 1,050 million, while the Companys free assets (cash + free shares) will be NIS 2,970 million (NIS 290 million + NIS 2,680 million, respectively). Additionally, during the bond repayment period, the Company will have a positive net cash flow of NIS 1,150 million. Stable operative operations – constituting an additional recourse. The controlling shareholders hold 87.5% of Scailex (prior to dilution of ~ 5-7% in bond conversions). Scailex will be able to boost its equity in the future by offering share capital to the public/strategic investor or by a sale of Partner shares to the public/strategic investor (telecom company can be controlled even with a holding of 26% and more – value of the excess shares (17%) = about NIS 1.75 billion. Over time, the bond rating might be raised as the business plan progresses.Summary25

26 Thank you for listening 26


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