By David French
An Abu Dhabi state-owned fund is financing a quarter of Etisalat's 4.2 billion euro purchase of Vivendi's stake in Maroc Telecom, said three bank sources with knowledge of the deal, adding it should close this week.
The identity of the fund is a closely-guarded secret. The banks that will provide the remaining 3.15 billion euros of loan finance have not been told which of the emirate's state-owned entities is supplying the cash.
The fund is most likely to be Mubadala, two of the banking sources and one industry source said, given that it already has telecommunications assets and an existing partnership with Etisalat in Africa.
Etisalat, Vivendi and Mubadala all declined to comment.
Etisalat agreed last November to buy Vivendi's 53 percent holding for 3.9 billion euros, plus a further 300 million euros in 2012 dividends from the Moroccan firm.
The deal is a key part of Vivendi's strategy to cut its debts and focus on areas like music and pay-TV, which it thinks have greater growth potential. Etisalat meanwhile will get new revenue streams outside of the domestic market which still dominates its earnings despite previous expansion drives.
Serkan Okandan, Etisalat's chief financial officer, said last month the deal should complete by end-May, but the three bank sources said they expected it to be done by the end of April, given that Etisalat had requested no further extensions on the committed financing.
Under the terms of an acquisition loan, lenders allocate the funds but the cash isn't taken by the borrower until the buy is completed. Banks have pledged to fund Etisalat's purchase since April last year and have extended their commitments on a number of occasions since then; the latest expires on April 30.
Etisalat earmarked around $8 billion of loan financing from around 16 banks to back its bid. The final facility is much smaller as that sum was to buy 100 percent of Maroc Telecom.
Funding structure
Etisalat will hold the Maroc Tel stake as a separate legal entity, in which the Abu Dhabi fund has bought a 25 percent stake, the sources said.
The rest of the 3.15 billion euro bank funding will be split between a short-term bridge loan and a three-year portion, said two of the original sources, and one other financial source. Roughly the same number of banks will fund the deal, the two original sources added.
Much of this funding, including the full bridge loan, is expected to be refinanced through future bond or sukuk issues.
With Etisalat planning to use dividend payments from Maroc Tel to repay the acquisition debt, bonds will provide longer-term funding to match the timeframe needed to receive enough dividends - one banker estimated it would take between seven and eight years of payments to clear the debt.
Etisalat, currently in 15 countries across the Middle East, Africa and Asia, said Sunday its first-quarter net profit rose 11 percent on higher revenue and subscribers.
