Business combination of Sunrise and Orange in Switzerland
Today, TDC A/S announces that it has entered into a conditional agreement to
combine its Swiss subsidiary Sunrise Communications SA with Orange
Communications SA, a subsidiary of France Telecom S.A. As a result of a series
of transactions, TDC will receive a payment of EUR 1.5bn at closing from France
Telecom and become a 25% shareholder of the business combination.
TDC will continue to consolidate Sunrise until further notice. Upon
deconsolidation, Sunrise's activities will be reclassified to discontinued
operations. After closing, the 25% shareholding in the combined entity will be
accounted for as an associate (equity method).
The transaction is currently estimated to result in an impairment in respect of
Sunrise of approximately DKK 4.3bn after tax, which is expected to be
recognized in the income statement under special items in 4Q 2009.
The transaction will not alter TDC's outlook for 2009, which was published in
TDC's financial statement released November 6, 2009.
The combined entity will have a share buyback programme targeted at TDC's 25%
shareholding to be executed at the discretion of the Board using cash generated
by the company. If decided, the annual share buybacks will be executed in Q1 of
each of 2012, 2013 and 2014, on the basis of pre-agreed multiples applied to
prior year EBITDA and determined on the basis of a target net present value of
EUR 1.2bn for the full 25% TDC shareholding.
Furthermore, TDC will have the right to sell its stake to third parties from
the second anniversary of closing or to do an initial public offering of the
company from the third anniversary of closing. In addition, France Telecom will
have an option to buy TDC's shares from the first anniversary of closing at a
minimum value of EUR 1.2 bn plus interest, accruing at a rate of 7% per annum.
In connection with the above exit routes for TDC's shareholding in the combined
entity, it has been agreed that France Telecom shall pay EUR 100m per year to
TDC in each of 2012, 2013 and 2014 (representing c. EUR 245m of net present
value). However, these payments will not occur in the respective years in which
the share buyback is implemented, or if the France Telecom call option has been
exercised. Further, these payments may be reduced or reimbursed under certain
exit scenarios for TDC (exercise of France Telecom call option, IPO or sale to
a third party).
The signing of final transaction documentation is expected to take place in the
second half of February 2010. The transaction shall, amongst other conditions,
be subject to confirmatory due diligence and approvals from TDC's lenders and
the Swiss Competition Authorities. Closing is expected to occur in Q2 2010.
TDC A/S
Teglholmsgade 1-3
0900 Copenhagen C
tdc.com
