MILAN (Reuters) – Italy”s Enel has agreed the sale of telecoms unit Wind to a firm owned by Egyptian businessman Naguib Sawiris, valuing Wind at 12.14 billion euros ($15.3 billion) in one of Europe”s biggest leveraged buyouts.
Italy”s largest utility said in a statement on Thursday it would raise 3 billion euros and deconsolidate Wind”s debt of more than 7 billion euros in the long-awaited sale, which is likely to boost Enel”s dividend.
Enel shares jumped to three-week highs and were up 1.4 percent at 7.36 euros at 1450 GMT, helped by an expectation of an increased payout after the sale, traders said. The MSCI utilities index was up 1.3 percent.
Enel has long wanted to sell loss-making Wind — Italy”s number three mobile phone group and second-largest fixed-line provider — to concentrate on its gas and electricity business.
State-controlled Enel has lost 5 billion euros on the unit since 1998, when Wind was created in the heat of the new economy boom.
"In total, 17 billion euros was spent on Wind from the start of the adventure, and now we”ve taken in 12 (billion euros); we”ve lost 5 billion euros," Enel Chief Executive Paolo Scaroni told a shareholders meeting.
Scaroni is leaving the group to take the top job at Italian state-controlled oil and gas group Eni.
Enel plans to sell 62.75 percent of Wind to Sawiris”s Weather Investments company by the summer and the rest in the first half of 2006 under a put and call agreement.
Sawiris will transfer 50 percent plus one share of his family”s Egyptian telecoms group, Orascom , to Weather. The Orascom stake is worth 5 billion euros, Weather said in a separate statement.
Weather said a 9.3 billion euro financing package for the purchase of Wind included the refinancing of Wind”s existing debt. Weather will arrange a loan backed by Orascom global depositary receipts to help fund the deal.
Weather will refinance Wind”s debt in five tranches, three of which are senior, Weather”s legal advisers, Dewey Ballantine, said in its own statement.
Market sources said Wind was considering an about 1.7 billion euro high-yield bond, which could be the biggest high-yield debt ever issued in euros, to refinance part of debt.
Enel said Wind and Orascom wanted to save costs through joint activity and expand their market share in Europe, the Mediterranean area and other countries where Orascom is a leader — in the Middle East, Africa and Asia.
Enel will not quit the telecoms business but plans gradually to acquire a 26 percent stake in Weather, which will control 100 percent of Wind and 50 percent plus one share in Orascom.
Enel will use 305 million euros of the proceeds from the Wind sale to buy 5.3 percent of Weather. It would then raise that stake as Weather pays for the remaining 37.25 percent of Wind, worth 328 million euros, in cash and its own new shares.
The utility and Sawiris aim to list Weather as soon as possible, depending on market conditions. One source close to the situation said he did not expect the listing within a year.
Enel and Weather had been in exclusive talks since April after Sawiris beat out a rival bid for Wind from U.S. private equity firm Blackstone.
Sources close to the deal said Weather had won over Blackstone”s purely financial bid because it could offer a clear industrial strategy.
Analysts have said Wind”s new owners are not likely to pose a significant threat to its rivals — ex-monopoly Telecom Italia and mobile phone operators TIM and Vodafone — at least in the short term as investments planned by Sawiris are only slightly higher than Enel”s budget.
Utilities analysts said they wanted to know how the Wind sale would change Enel”s dividends. Enel has said it might take on more debt after selling Wind and distribute it as dividends.
"It is important to see what implications taking a 26 percent stake in Weather will have for Enel”s debt and dividend," said one analyst in Milan.
Banks ABN AMRO , Deutsche Bank and Sanpaolo IMI advised Weather on the deal and arranged financing, while Rothschild was financial and debt adviser. Morgan Stanley advised Enel.
Enel holds a conference call on the deal at 1630 GMT