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Turkcell May Bid for Vivacom at $1.4 Billion Valuation

Turkcell Iletisim Hizmetleri AS, the biggest Turkish mobile-phone company, may make a bid for Vivacom AD, valuing Bulgaria’s largest fixed-line company at as much as $1.4 billion, people with knowledge of the process said.

The Turkcell board is expected to meet as soon as this week to discuss bidding, said one person, who declined to be identified because the process is private. While Turkcell’s management is eying Vivacom, Bulgaria’s incumbent telecommunications operator, a deal would need the approval of its board, which has blocked proposed deals before.

Turkcell is evaluating potential investments abroad, including a possible bid for Vivacom and there’s no board decision on any bid, the company said in a statement to the Istanbul Stock Exchange today.

VTB Capital, the investment banking unit of Russia’s second-biggest state-run lender VTB Bank OJSC, is considering the acquisition of Vivacom together with Sofia-based Corporate Commercial Bank AD, said Atanas Bostandjiev, chief executive officer of VTB Capital Plc, in an interview in Sofia today.

Three binding bids have already been submitted for the company, the Bulgarian newspaper Capital reported, without specifying the amounts of the offers. The other bidders include Icelandic billionaire Thor Bjorgolfsson, who controlled Vivacom between 2005 and 2007 and has bid with Panos Germanos, who founded the Greek phone-services retailer Germanos SA. The third bidder to meet the Feb. 27 offer deadline is Pamplona Capital Management LLP, a London-based private equity firm, according to the newspaper.

Vivacom Offerings

Vivacom is a so-called quadruple play phone operator, offering fixed-line, broadband, television and mobile services in one bill. Such companies are valued at about five or six times their earnings before interest, tax, depreciation and amortization, or Ebitda, said the people familiar.

The Sofia-based company had an Ebitda of 343 million Bulgarian leva ($244 million) last year, and net income of 8.65 million leva, according to data compiled by Bloomberg. Vivacom has about 2.5 million subscribers, one of the people familiar said. Its sales fell to 886 million Bulgarian leva in 2011 from 896 million leva a year ago, according to the company’s website.

A Vivacom spokesman declined to comment on the bids.

Li Investment

The Bulgarian company is majority owned by PineBridge Investments LLC, the investment-management firm owned by Hong Kong businessman Richard Li. Vivacom breached terms on 1.6 billion euros ($2.1 billion) of loans a year ago, which led to it being put up for sale. The financing for Vivacom’s 2007 buyout had been arranged by Deutsche Bank AG, UBS AG and UniCredit SpA, along with Royal Bank of Scotland Group Plc, Bloomberg data show.

Morgan Stanley is advising Vivacom’s creditors to help sell the company, the people familiar said. A spokesman for the bank declined to comment.

Turkcell Chief Executive Sureyya Ciliv said in an interview on Feb. 23. that the Turkish company was assessing whether to bid for Vivacom.

Turkcell fell 0.6 percent to 9.54 liras at the close of trading in Istanbul, paring two days of gains. That valued the company at 21 billion liras ($12 billion.) Turkcell had net income of 331.7 million liras in the fourth quarter, falling 9.9 percent from the same period of 2010.

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