Cosmote Mobile Telecommunications SA, Greece’s biggest wireless operator, will pay as much as 1.58 billion euros ($2 billion) to buy Germanos SA, the country’s biggest phone services retailer, to spur its expansion into eastern Europe.
Cosmote will pay 19 euros a share to buy a 42 percent stake from Germanos’s main shareholder Panos Germanos and other investors, the Athens-based company said in a faxed statement today. Cosmote will offer the same price to buy out minority shareholders, bringing the value of the transaction up to 1.58 billion.
The acquisition “is of major strategic importance, adding in one go the most efficient retail networks in four out of the five countries it operates in,” the company said. The price of 19 euros a share is 5.4 percent higher than Germanos’s closing share price on May 4 of 18.02 euros. Both Cosmote and Germanos shares have been suspended from trading since May 5.
The acquisition will consolidate Cosmote’s dominance in Greece and allow it to quickly reach clients that Germanos has through a network of stores in countries like Romania and Bulgaria. Cosmote last year spent 610 million euros buying wireless businesses in Bulgaria, Macedonia and Romania to tap demand for mobile-phone services that is growing faster than in its home market.
Reinvests
The net cost of the acquisition will come to 1.3 billion euros after the company sells units it doesn’t need, such as a battery production business and stores in Poland, Ukraine and Cyprus, back to Panos Germanos and he reinvests 10 percent of the total Cosmote participation back into the company, Cosmote said.
Cosmote doesn’t expect the public offer to take place before the end of August, it said. The move “is expected to be accretive for Cosmote from the first full year of consolidation” and won’t affect the company’s dividend policy, the statement said. Germanos’s management will remain part of the business.
About 200 Germanos stores are in Bulgaria, Romania and Macedonia, according to company figures. Cosmote is banking on those countries to increase profit 10 percent this year, as demand for wireless services drives sales 20 percent higher.
Germanos has followed Cosmote and other European phone companies into eastern Europe to tap demand for mobile and fixed- line phone services. Almost two-thirds of Germanos’s 950 stores are outside Greece, providing about 30 percent of the company’s total sales of 1 billion euros last year.
Boosted Sales
Cosmote reported a full-year profit of 339.9 million euros last year, a 10 percent gain from 2004, as the acquisitions and higher usage from Greek clients boosted sales 13 percent to 1.8 billion euros. At the end of last year, Cosmote, which also owns a unit in Albania, had 8.3 million clients across the 5 countries.
In Romania, Germanos’s 101 stores will give Cosmote a broader reach in the nation of 22 million. Cosmote Romania started offering the lowest mobile-phone rates in December to challenge the dominance of local units of Vodafone Group Plc and France Telecom SA’s Orange, which each have more than 5 million customers. Cosmote Romania had 48,934 clients at the end of 2005.
The purchase is also likely to help Cosmote’s Bulgarian unit, Globul, the no. 2 operator, deal with heightened competition in the Balkan state of about 8 million.
