Bloomberg News

Netia Climbs to Eight-Week High After Buying Dialog, Crowley

September 30, 2011

Sept. 30 (Bloomberg) -- Netia SA, Poland’s second-largest fixed-line phone company, soared to an eight-week high after agreeing to buy two competitors for a total of more than 1 billion zloty ($303 million).

The stock jumped as much as 7.7 percent to 5.29 zloty, the biggest intraday advance since Aug. 4, and traded at 5 zloty at 10:13 a.m., giving it a market value of 1.96 billion zloty. The benchmark WIG20 Index declined 1.1 percent.

Netia agreed to buy Telefonia Dialog SA, a telecommunications operator with 156,000 broadband Internet customers, for 944 million zloty from copper producer KGHM Polska Miedz SA, the Warsaw-based phone company said late yesterday. It also purchased Crowley Data Poland Sp. z o.o., focusing on corporate clients, for $31.8 million.

Netia forecasts it will be able to save as much as 106 million zloty a year from the two transactions starting in 2014, it said in a presentation on its website.

The company’s 2011 sales would rise to 2.25 billion zloty from the forecast 1.61 billion zloty if it consolidated Crowley and Dialog from the beginning of the year, Netia said. Earnings before interest, taxes, depreciation and amortization, or Ebitda, would be higher by 39 percent at 561 million zloty.

Netia will finance the transactions with its own funds and a 650 million-zloty loan from Rabobank Group, BNP Paribas SA, BRE Bank SA and Raiffeisen Bank Polska SA.

Closing by January

Netia predicts it will be able to close the two transactions in December or January after getting antitrust approvals.

The transactions should boost operating profit in 2012 and net income in 2013, Netia said in the presentation.

Netia, which trades today with an enterprise value of 4.2 times its Ebitda for the last 12 months, said the 2011 EV/Ebitda ratios, which measure the valuation of an acquisition, it paid for Dialog and Crowley were at 6.4 and 6 respectively.

“The prices paid in both transactions are very reasonable,” Pawel Puchalski, an analyst at Bank Zachodni WBK SA, wrote in a research note today, calling the news “long- awaited and very positive.”

The purchase of Dialog makes Netia’s mid-term target of reaching 1 million broadband clients “easy-attainable,” Puchalski said. It had 719,000 broadband subscribers at the end of June.

Netia said in a separate statement it was advised on the Dialog transaction by Raiffeisen Investment, Rabobank M&A International, Lazard and Weil, Gotshal & Manges, while Rothschild and Gide Loyrette Nouel worked for KGHM.

Telekomunikacja Polska, which had 2.3 million broadband Internet clients at the end of June, is Poland’s biggest fixed- line phone company.

--Editors: Nathaniel Espino, James M. Gomez

To contact the reporters on this story: Pawel Kozlowski in Warsaw at pkozlowski@bloomberg.net; Maciej Martewicz in Warsaw at mmartewicz@bloomberg.net

To contact the editors responsible for this story: James M. Gomez at jagomez@bloomberg.net; Gavin Serkin at gserkin@bloomberg.net


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