Winnipeg Free Press - PRINT EDITION
Posted: 10/8/2013 1:00 AM | Comments: 0
Last Modified: 10/8/2013 6:44 AM | Updates
The sale of MTS's Allstream national business telecommunications division to Egyptian-based Accelero Capital Holdings has been rejected by Industry Canada because of unspecified national security concerns.
The sale announced in May had valued the Allstream division at $520 million.
MTS CEO Pierre Blouin said the news late Monday afternoon came as a complete surprise to the company.
Blouin said, "We have been collaborating with the government for 136 days. I am sure the review is not about MTS and Allstream and more about Accelero. We have been very open with the government."
Accelero's principal, Naguib Sawiris, has already been active in Canada, investing about $1 billion in his financial backing of Wind Mobile Canada.
The original deal with Accelero was only made possible after Industry Canada loosened its foreign investment criteria for certain smaller Canadian telecommunications companies.
Blouin said it was in light of those changes MTS launched a strategic review to see if it could find a buyer for Allstream.
Although this was the first such review the government undertook under the new regulations, Blouin said it seemed to be right in line with the new government policy.
"We pursued the review in a very collaborative way and to come at the end today and be basically informed that the government was rejecting the transaction based on national security concerns without outlining what those concerns are or giving us an opportunity to correct them is quite a surprise," Blouin said.
In a statement, Industry Minister James Moore confirmed the proposed acquisition was rejected under the national security provisions of the Investment Canada Act.
"The result of this review is that the transaction will not proceed," he said in an emailed statement.
The minister did not specify what the security concerns may be, but said: "MTS Allstream operates a national fibre-optic network that provides critical telecommunications services to businesses and governments, including the Government of Canada."
Accelero said in a statement late Monday it has committed to an investment of $300 million to increase Allstream's competitiveness and accelerate the introduction of innovative new products
Co-founder Sawiris said, "We are disappointed by the Government of Canada's unfounded and unexpected decision. Throughout this process, we were comforted by Industry Canada that our filings were in order, our submissions complete and constructive, and our proposed binding undertakings serious and substantive so that the transaction would meet the 'net benefit' test"
The transaction was not going to impact MTS's Manitoba operations and the rejection of the sale will also not impact the company's operations here, which Blouin said are doing well.
However, about $165 million of the proceeds from the sale had been slated to go to the company's pension fund financing obligations.
Blouin said both companies will now review their options.
But he said it is unlikely that will MTS will restart efforts to find a buyer for its national business telecommunications business.
"It would be challenging to restart a process after all this disruption, especially not knowing exactly what the rules we have to follow are," Blouin said in an interview early Monday evening. "Now the focus will be running the business, getting it back to what it was before we started the process and making it successful again."
Blouin said the May 24 announcement of the deal with Accelero did not impact the company's strategy in the upcoming wireless spectrum auction.
The Winnipeg-based company incurred about $35 million in costs since the deal was originally announced.
The company issued a revised financial outlook for 2013 on Monday with lower EBITDA (earnings before interest, taxes, depreciation and amortization), lower earnings per share and lower free cash flow guidance estimates.
Blouin admitted the transaction review process has been disruptive to Allstream, which had previously recorded 10 consecutive quarters of increased EBITDA. The company said Allstream revenues have been impacted by higher than expected legacy churn from exit activities, as well as slower than expected installation of a large contract won late in 2012.
The news came after the close of trading Monday where MTS shares finished down 15 cents to $32.36.
-- With files from the Canadian Press
Republished from the Winnipeg Free Press print edition October 8, 2013 B5
Updated on Tuesday, October 8, 2013 at 6:44 AM CDT: Replaces photo
Have you found an error, or know of something we’ve missed in one of our stories? Please use the form below and let us know.
Having problems with the form?Contact Us Directly
High hopes for low-cost grocers
BBC shifts controversial host out of Top Gear
Yahoo says it will buy back $2 billion in stock
Competition Bureau OKs Postmedia/Sun deal
Meerkat vs. Periscope: Live-streaming app battle & buzz
Google's new CFO gets $70M for defecting from Morgan Stanley
Oil council: Shale won't last, Arctic drilling needed now
How the Dow Jones industrial average fared Thursday
Heinz, Kraft to merge
Most actively traded companies on the TSX
MIT expert: US rules make chances of cockpit takeover slim
Mentally stable at 38,000 feet: Can you trust your pilot?
$1 billion water spending plan heads to California governor
Highlights of 2015-16 Quebec budget
Woman accused of kidnap plot claimed to be business coach
Quebec tables balanced budget with debt in mind
Monsanto fined for not reporting Idaho chemical releases
Oil prices jump almost 5 per cent as tensions mount in Yemen
US stocks extend losses to a fourth day, oil price gains
Airlines to require 2 crew members in cockpit at all times
Puerto Rico to receive world's 2 largest cruise ships in '16
Maker of tainted medical scopes issues new cleaning guide
Grain lower, livestock mostly lower
Microsoft wants US suppliers to give employees paid time off
Government criticizes NDP for T-shirts
FACT CHECK: Myths in the political roar over Common Core
Bankruptcy hearing could decide fate of RadioShack
Ricki's, Bootlegger, Cleo in court protection
CBC News slashing 144 jobs, Radio-Canada cuts 100
Unprecedented sage grouse protection deal signed in Nevada
Obama praises payday lender rules, vows veto of limitations
200 hens poached from California farm weeks before Easter
Spotify's Top 10 most viral tracks
Authorities go after crooked car deals in national crackdown
Diet sodas fall in US; Pepsi takes back No. 2 spot
Nova Scotia to gain $7.7 million in fee hike
Child fatally struck by public transit bus in Rhode Island
Worker struck by new roller coaster during testing at park
Regulator proposes new TV service code