Maltacom plc - The Offer made by Tecom Investments LZ-LLC for Government’s shareholding

Tuesday, April 4th, 2006

Maltacom plc announced that it was informed by the Privatisation Unit that the Government of Malta has decided to grant Tecom Investments LZ-LLC ‘Tecom’ the preferred bidder status for its 60% shareholding in Maltacom plc and that negotiations are to be opened with a view to finalize an agreement within a limited period of time.

Meanwhile, in a separate announcement, Maltacom revealed that Tecom Investments have made an offer of Euros 214,000,000 (two hundred and fourteen million euros) for the Government’s 60% shareholding in Maltacom plc. The offer amount translates into Lm1.51 (One Maltese Lira and fifty one cents) per share.

Separately the Department of Information issued the following press release:

ANNOUNCEMENT ON THE PRIVATISATION PROCESS OF MALTACOM PLC

Following the consideration of a report submitted by the Privatisation Unit, today, Cabinet has agreed to the Unit’s recommendation for Government to grant Tecom [Investments] a Preferred Bidder Status and allow a period of exclusive contract negotiations with the proviso that if the negotiations progress satisfactorily, the timeframe will be extended.

The recommendation to Government was signed by all the members of the Evaluation and Adjudication Committee as well as by its financial advisors (Lehman Brothers) and its legal advisors (Camilleri Preziosi). The Evaluation and Adjudication Committee was led by the Chairman of the Privatisation Unit, Mr Emmanuel Ellul.

The privatisation process started in July 2004, when the Privatisation Unit appointed Lehman Brothers to act as its financial advisors and assist it in the privatisation process. In July 2005, Lehman Brothers issued, on behalf of Government, an international call for Non-Binding Offers for a Strategic Partner to take over Government’s 60% equity in Maltacom plc. Since its first announcements on the rationale underlying its decision to privatise the company, Government has consistently stressed that it was keen to divest its shareholding to a strong technology player who would be a strategic partner and focus on extending the Group’s capabilities in serving as a catalyst for the information society and economy, with a particular focus on the application of convergence of networks.

In October 2005, the Privatisation Unit received five non-binding offers. The offers received were based on serious and professional interest and were coming from reputable bona fide offerors. In December 2005, the latter were requested to submit their final binding offer. This phase closed on the 16th January 2005, when the Privatisation Unit received offers from two bidders:

o Abdulrahman Saleh Al Rajhi & Partners (‘Ararco’)

o Tecom Investments LZ-LLC (‘Tecom’)

In the light of the sensitivity of the process and also of the strategic importance of Maltacom plc in the development of the Maltese society and economy, an extensive and detailed evaluation and adjudication process was developed to ensure that all facets of the bid would be assessed comprehensively. The evaluation and adjudication process, methodology, the criteria as well as the weighting associated with each criterion were determined and agreed to by all participants in the evaluation process, before the bids were opened.

In fact, the evaluation was based on a 1000-point score composed of three components:

o FINANCIAL (375 points): A Financial Assessment Committee, led by Lehman Brothers was tasked with evaluating the financial standing of the two bids made as well as the financial background and strength of the two bidders;

o STRATEGIC AND COMMERCIAL (325 points): A Strategic and Commercial Assessment Committee led by Analysys (www.analysys.com) was tasked with assessing the strategic and commercial vision of the proposals within the context of their plans for Maltacom. Analysys are recognized industry leaders in the provision of telecoms-related consultancy services; and

o TECHNICAL (300 points): A Technical Assessment Committee led by Gartner (www.gartner.com) was tasked with evaluating the technical vision, strategy, capabilities, capacity and strength of the bidders. Gartner is a recognized industry leader in the provision of IT-related consultancy services.

In its report and recommendations to Minister Austin Gatt, the Privatisation Unit aggregated the three independent scores, which resulted in Tecom attaining a score of 111.9 (18.3%) higher than that of Ararco. The Privatisation Unit also stated that the financial bid put forward by Tecom (Euro 214 million) was slightly higher than that of Ararco.

According to Lehman Brothers both bids “represent a discount to current market price for Maltacom but are consistent with the current market valuation for Telecom incumbents”. Lehman Brothers continue that “the high current valuation of Maltacom does not reflect in our view the fundamental prospects of the Company”. Tecom’s bid implies a share price valuation of Lm 1.51 per share and is at 6.1 x 2005 EBITDA (Earnings Before Interest Tax Depreciation and Ammortisation).

In this context, the recommendation of the Privatisation Unit to Government concluded that Tecom’s proposal as submitted in its binding offer presented a strategic fit with Government’s set out objectives for privatisation, therefore advising it [Government] to consider entering into the exclusive contract negotiations.

As is customary in all privatisation processes, Government will – on conclusion of the process – be submitting all the process documentation for the consideration of the Public Accounts Committee of the House of Representatives.

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