The investment company of Wind Mobile‘s founder confirmed it would buy Vimpelcom Ltd‘s majority stake in the young Canadian wireless company, promising a fresh boost of capital as it seeks to cement its place as a major national player.
The deal, which is subject to regulatory approval, includes the purchase of Vimpelcom’s direct and indirect debt and equity interests in Wind, Globalive Capital said on Tuesday.
The company, the investment vehicle of Wind Mobile founder and chairman Anthony Lacavera, did not disclose a deal price, but two sources with knowledge of the matter said on Monday that the price tag was around $300 million.
At that price, the deal sharply discounts well over US$1 billion plunged into Wind since 2008, suggesting rival bids were difficult to come by amid federal government opposition to established domestic operators gobbling up struggling new entrants.
Vimpelcom holds 65 percent of Wind’s equity but only one third of its voting shares—an arrangement originally put in place to comply with restrictions on foreign control of Canadian telecom companies—as well as most of its debt. The rules have since been loosened for small operators.
The deal was partly funded by a consortium of private equity investors including West Face Capital, Tennenbaum Capital Partners, LG Capital Investors, Serruya Private Equity and Novus Wireless Communications, Globalive said.
“With stable, long-term ownership and secure financing, Wind Mobile is moving into an exciting new phase,” Lacavera said in the statement, adding that Wind had 750,000 subscribers, up from more than 735,000 in June.
Canaccord Genuity analyst Dvai Ghose was dubious, however, that the reported deal would mean a sharp increase in investment or that Wind would be able to compete more seriously with Canada’s three dominant national wireless companies, which together control some 90 percent of the market.
In a note to clients published before the deal was made official, he said the private equity backers will likely operate Wind on a shoestring budget until they are able to sell to one of the big three: BCE Inc, Telus Corp or Rogers Communications Inc.
“If the story is true, for us this would further highlight the failure of the new entrant model in Canada,” he wrote, pointing to fellow new entrant Mobilicity‘s creditor protection status, third upstart Public Mobile‘s sale to Telus, and Quebecor Inc‘s Videotron garnering only around 11 percent wireless market share in Quebec despite the regional operator’s competitive advantages in the province.
One of the backers applauded Ottawa’s moves to encourage more competition, which also include enforcing domestic roaming rate caps and tougher rules on tower-sharing.
“The federal government’s delivery on its promise to create the conditions for viable long-term wireless competition has not gone unnoticed by the investment community,” said Greg Boland, the CEO of West Face Capital.
(Reporting by Alastair Sharp; Editing by Stephen Coates)
(This story has been edited by Kirk Falconer, editor of PE HUB Canada)
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