United Group acquires majority stake in Optima Telekom through Telemach Croatia

United Group, a leading provider of telecommunications and media services in Southeast Europe, has reached an agreement with Hrvatski Telekom (HT) and Zagrebačka banka regarding the acquisition of a majority stake in Optima Telekom, a Croatian operator providing fixed internet and pay-TV services, the company announced.

United Group, which provides telecommunications services in Croatia under the Telemach brand, has signed a purchase agreement to acquire 17.41 percent of shares from Hrvatski Telekom and 36.90 percent of shares owned by Zagrebačka banka, thus obtaining a total of 54.31 percent of Optima Telekom shares.

HT stated that the completion of the transaction is subject to regulatory approvals and other agreed conditions, and is expected by the end of 2021. The purchase agreement specifies the value for 100 percent of the shares in Optima Telekom, excluding debt or cash on the balance sheet (enterprise value), at 639 million kuna, which represents 5 x earnings before interest, taxes, depreciation, and amortization before one-off items and after leases (EBITDA) in 2020. The total expected cash inflows for Hrvatski Telekom will be determined considering certain agreed predefined parameters, and the price per share from the agreement will be lower than the quarterly weighted average that would be applied by the buyer in the mandatory takeover bid (weighted average of Optima’s share prices achieved on the regulated market during the period between April 8, 2021, and July 8, 2021).

It is worth noting that Hrvatski Telekom acquired an ownership stake in Optima Telekom through the conversion of claims into equity as part of a pre-bankruptcy settlement and obtained management rights based on an agreement with Zagrebačka banka, the largest shareholder of Optima Telekom.

The Competition Protection Agency (AZTN) conditionally approved the concentration of Hrvatski Telekom and Optima Telekom in 2014, based on a Management Agreement signed between Hrvatski Telekom and Zagrebačka banka, for a limited period of four years, while in June 2017, the duration of the conditionally approved concentration was extended to July 10, 2021.

Regardless of the completion of the share purchase transaction, the concentration of Hrvatski Telekom and Optima Telekom will cease on July 10, 2021, at which point Hrvatski Telekom’s management over Optima will also end.

United Group announced that it is investing 130 million euros in the modernization of Telemach Croatia’s mobile network to improve quality, expand coverage, and offer users a comprehensive 5G experience. Additionally, the Group is investing 100 million euros in building a state-of-the-art optical network, which already offers Croatian users fixed telephony and super-fast broadband Internet with speeds ranging from 300 Mbps to 2 Gbps.

Once the transaction is completed, 125,000 broadband network subscribers and 55,000 pay-TV service users of Optima Telekom will gradually benefit from the mentioned investments and new modern services that will enable convergence with mobile services and improve quality and user experience, United Group stated.

According to the terms of the agreement, the completion of the transaction depends on changes to the Croatian Electronic Media Act, which currently prohibits vertical integration between TV publishers and operators transmitting media content. The agreement is also conditional upon approval from the relevant competition protection authorities.

-This agreement represents a further step in our plan to transform Telemach Croatia into a fully convergent telecom company that offers a full range of telecommunications services, including TV, on its own infrastructure – said Adrian Ježina, CEO of Telemach Croatia.

"We expect that the Croatian Parliament will soon consider amendments to the Electronic Media Act and we are confident that these amendments and alignment with practices of other European Union member states will follow, allowing us to complete this transaction and include TV services in our broader telecommunications offering in Croatia – adds Adrian Ježina.

Optima shares are listed on the Zagreb Stock Exchange. After obtaining regulatory approvals, United Group will submit a public offer for the acquisition of the remaining shares of Optima.

United Group operates in eight countries in the region and has approximately 11 million users and more than 12,500 employees. The company has the widest network coverage in Southeast Europe and offers users the most attractive selection of TV content from around the world, as well as some of the most popular domestic content.

The process of selling Optima Telekom shares began on January 31, 2020, with the announcement of a public call for bids and the subsequent selection of the investment bank Credit Suisse (Deutschland) Aktiengesellschaft based in Frankfurt am Main, which led the sales process, jointly engaged by Hrvatski Telekom and Zagrebačka banka.