Egyptian billionaire Naguib Sawiris, who has said in the past that he regretted investing in Canada, is giving it another go.
Accelero Capital Holdings, an investment firm co-founded by Sawiris, agreed to buy Manitoba Telecom Services Inc. (MBT)’s Allstream business-services unit for C$520 million ($503 million), according to a statement today.
The deal gives Accelero a network of 30,000 kilometers (19,000 miles) of fiber-optic lines, reaching 50,000 business customers across Canada. It also represents an about-face for Sawiris, who said in November 2011 that Canada wasn’t a good place to put investors’ money. He had struggled with his earlier investment into Wind Mobile, which faced competition from other discount wireless operators as well as legal challenges over Canada’s foreign ownership restrictions.
Sawiris said in a statement that today’s transaction “reflects Accelero’s long-term commitment to the Canadian telecommunications market, and our belief in the opportunity that exists to provide capital to enhance the competitive landscape in Canada.”
Manitoba Telecom Chief Executive Officer Pierre Blouin is selling the Toronto-based Allstream unit to focus on his company’s consumer telecommunications business. Manitoba Telecom plans to use the proceeds to fund its pension and repay debt. It also will invest in new spectrum and improve the speed of its existing wireless networks.
Shares of Winnipeg-based Manitoba Telecom climbed 5.7 percent to C$33.93 in Toronto. The stock has risen 4.5 percent this year, valuing the company at about C$2.3 billion.
In his earlier foray into Canada, Sawiris’s Orascom Telecom Holding SAE backed Wind Mobile with a $700 million loan in 2008, helping finance the company’s purchase of wireless spectrum.
Wind Mobile’s initial strategy of offering cheap prepaid wireless service faced competition from other discount operators such as Public Mobile, as well as the established brands.
Accelero has submitted a bid to buy Wind, a person with direct knowledge of that process has said, asking not to be named because the information is private.
Accelero, working with another partner, is bidding between C$500 million to C$700 million, including the $440 million in spectrum assets Wind bought in 2008, the person said.
Ossama Bessada, managing partner of Accelero, declined to comment whether it’s bidding for Wind.
“We are focused on the Allstream opportunity,” Bessada said today.
Bessada said he is confident that the Allstream deal will be approved as it offers a valid benefit to Canadian businesses.
“We see no reason why the Canadian government will reject this,” he said.
The Allstream deal boosts the chances that Accelero will buy Wind, said Drew McReynolds, an analyst at RBC Capital Markets. Sawiris started Accelero, which is based in Paris and Cairo, after building a wireless empire that spans Europe, the Middle East and North Africa.
“This transaction increases the probability that Accelero will look to acquire Wind Mobile,” McReynolds said in a note, citing the potential synergies and Sawiris’s “renewed commitment to Canada.”
Manitoba Telecom, meanwhile, may eventually be an acquisition target for a large phone company like BCE Inc.’s Bell wireless business or Telus Corp., McReynolds said.
“Without Allstream, we believe MTS could become a takeout target for either Bell or Telus over the longer term,” he said.
Blouin, speaking on a conference call with analysts, declined to say whether today’s deal makes Manitoba Telecom a more likely target. Manitoba Telecom plans to use C$130 million from the sale to contribute to the company pension and will repay C$70 million in debt.
“We believe this deal is positive for Allstream, MTS and telecom overall,” Blouin said. “This supports the plans we have for making MTS even stronger.”
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