ADVERTISEMENT

Turkcell Jumps as Wealth Fund Takes Control and Billionaire Ups Stake

Turkcell Jumps as Wealth Fund Takes Control and Billionaire Ups Stake

(Bloomberg) --

Turkcell surged the most in almost nine years after Turkey’s wealth fund agreed to take control of the nation’s largest mobile phone operator, ending a feud that hampered the company’s growth plans and dividend payouts.

Turkey Wealth Fund will become the largest shareholder in Turkcell Iletisim Hizmetleri AS and gain control of the board with its 26.2% holding including a 15% privileged stake, according a statement on its website. Russian billionaire Mikhail Fridman’s LetterOne Investment Holdings will raise its ownership to a direct 24.8% stake from an indirect 13.2%. Founding partner Cukurova Holding exited all of its 13.8% indirect stake.

Sweden’s Telia Co., which invested in Turkcell in 1994, will exit by selling its 24% indirect stake at a 54% discount. Telia said it will incur a capital loss of 3 billion kronas ($322 million) that will be booked in the second quarter. Accumulated foreign exchange losses of nearly 17 billion kronas will have no impact on equity or cash flow because this was “a pure recycling effect,” it said. The TWF will finance the deal through “state mandate and a loan from LetterOne,” Telia said.

​“We have achieved the most elegant way of solving the shareholder problem,” TWF Chief Executive Officer Zafer Sonmez said during a video-conference call. “We have taken steps to settle the dust and unlock the value of Turkcell.” All investors will have direct ownership of Turkcell, he said.

Turkcell Jumps as Wealth Fund Takes Control and Billionaire Ups Stake

The changes will end a 15-year-old shareholder fight for control of Turkcell. For Telia, it also tied up cash it could’ve used to expand closer to home in Nordic and Baltic countries, while the decline in the lira would also have diminished returns.

Turkcell shares climbed as much as 10%, the most since November 2011.

“Shareholders aim to support Turkcell’s existing dividend policy which we think is positive for minority shareholders,” said Cemal Demirtas, head of research at Ata Invest in Istanbul. “All in all, we believe that clarification and simplification at the ownership structure could be a reason for the re-rating of Turkcell shares.”

Read More: Telia’s Turkish Exit to End a 15-Year Feud Comes at Cost

The TWF, established to strengthen several Turkish state assets after a failed coup in 2016, will control 5 of the 9 directors on Turkcell board and the rest could be elected by other stakeholders. The parties agreed to resolve all international court cases, Turkcell said in a separate filing.

Read more: Telia’s Turkcell Plan May Ease Shareholder Dispute, Analysts Say

The Turkcell investment will be a first for the wealth fund after it was allowed to take over private companies as part of a series of measures to help the economy survive the coronavirus pandemic. The deal is expected to close in the second half of the year.

Sonmez also said:

  • TWF will finance the purchase of the $150 million Telia stake from its coffers, while the remainder will be interim loan from LetterOne, which will later be canceled out as LetterOne increases its stake
  • LetterOne has a one-year lock-up on Turkcell shares
  • Cukurova Holding, owned by Turkcell founder Mehmet Emin Karamehmet, will exit all of its indirect 13.8% stake, pledged to TC Ziraat Bankasi AS
  • TWF, which wholly owns Ziraat, will repay $1.6 billion debt of Cukurova to acquire the stake and will become the borrower of that loan. TWF may get a new loan to fund it
  • All parties agreed to forsake existing legal cases in international arbitration courts
  • TWF sees a long-term investment strategy in Turkcell
  • TWF’s 6.7% stake in Turkcell’s rival Turk Telekomunikasyon AS, isn’t an antitrust threat; fund has no plans to invest further in Turk Telekom

©2020 Bloomberg L.P.