Cinven Gives Up on Telekom Slovenia Purchase as Deal Not Viable

Cinven Group Ltd., the sole bidder for a 73 percent stake in Telekom Slovenije, Slovenia’s biggest phone company, pulled out of the transaction deeming it unviable.

The private equity group said that hurdles including a “not encouraging” regulatory environment, increased costs due to “tight conditions” on the financial markets and the complexity of Slovenian politics have contributed to its decision to abandon the sale, the Slovenian Sovereign Holding, which manages the process, said in an e-mailed statement on Tuesday.

The failed sale of the telecommunications operator, the biggest company on the government’s privatization list, sets back Slovenia’s efforts to raise capital and improve its image as an investor-friendly destination. This is the second failed attempt by the Adriatic nation to sell the phone company.

“The agency should now evaluate whether they can generate quickly a new interest for Telekom Slovenije and restart the process,” Saso Stanovnik, head of research at Ljubljana-based brokerage Alta Invest, said in an e-mail. “I would expect a correction of the stock price. In the last two months the price was mostly on a downward path as more and more investors speculated Cinven won’t submit a bid.”

Telekom Slovenije shares closed unchanged at 94 euros from the previous session at the Ljubljana stock exchange, according to data compiled by Bloomberg. The stock plunged 35 percent from the start of the year, valuing the company 614 million euros ($673 million), data show.

“Any problems in the privatization process are negative for the overall credibility of structural economic reform in Slovenia,” Gunter Deuber, head of research at Raiffeisen Bank International AG in Vienna, said in an e-mail. “The argument from the potential buyer looks like a repetition of traditional complaints about an unfriendly investor environment in the country. If this does not change, the overall privatization process will remain an uphill battle.”

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