Gains/costs from acquisition Celtel These are relative to being a stand-alone private company Source of gain /cost Liquidity Costs of issuance Revenue or growth synergies Costs of integration to achieve revenue gains Cost savings Costs of integration to achieve cost savings Gains from financial restructuring Gains from business portfolio restructuring IPO +20-30%? -5-10% 0 0 0 0 0 0 MTC 0 0 MTN 0 0
Meulenbroek's Memo All numbers in USD millions Offer price Transactions costs of the acquisition (7%) Estimated revenue gains (network effect) Estimated cost savings (overhead) Estimated cash management improvements Estimated gains from divestitures Estimated restructuring costs Estimated growth rates Estimated financing cost - debt Estimated financing cost - equity Estimated country risk premium Estimated stand-alone value (IPO) 2000 Upfront Years 1-3 3400 238 80 25 15 25 25% 7% 13% 5% Later years
150 40 30
5% 6% 13% 4%
Celtel: Synergy Valuation All numbers in USD millions Offer price Transactions costs of the acquisition (7%) Estimated revenue gains (network effect) Estimated cost savings (overhead) Estimated cash management improvements Estimated gains from divestitures Estimated restructuring costs Estimated growth rates Estimated financing cost - debt Estimated financing cost - equity Estimated country risk premium Estimated stand-alone value (IPO) 2000 Upfront Years 1-3 Later years 3400 238 80 25 15 25 25% 7% 13% 5% 150 40 30
5% 6% 13% 4%
Cash flows Estimated revenue gains (network effect) Estimated cost savings (overhead) Estimated cash management improvements Estimated gains from divestitures Estimated restructuring costs Net effect TV Tax rate Debt % Equity % WACC PV Sum of PVs Value of Celtel to MTC (standalone + gain) Less cost of the acquisition (price + fees etc) Net gain (loss) Effect on MTC if rival wins?
2006 80 25 15 0 -25 95 17% 34% $ 66% $
2007 100 31 19 0 -25 125
2008 125 39 23 0 -25 163 2376
3.6 billion 7.0 billion 15.5% 15.5% 82 94
15.5% 1646
1822 3822 -3638 184
2009+ 150 40 30 0 0 220
14.3%