Agreed: Searchlight Capital Partners will acquire the control of Bezeq group

by Ifi Reporter Category:Financial May 14, 2019

Searchlight Capital Partners has issued an updated offer to bondholders in the universe following a summary it reached with the representatives of the owners and Internet Gold, and the updated offer will be discussed today at a meeting of Bondholders of the third series.
Under the deal, Searchlight will invest NIS 260 million in Beecomm and will get the control over Bezeq.
 On the Closing Date in exchange for an allotment of shares Concurrently, the company will make a share offer in the amount of NIS 70 million to its existing shareholders based on its relative share in the holding therein, on terms identical to the Serclight offer. Thus, the current controlling shareholder Internet Gold Will invest NIS 35 million in the universe and NIS 35 million will come from the minority shareholders when Searchlight will undertake to enter the minority (fully or partially) if the minority does not rush to inject money into the company.
The share price in the allocation will be lower than NIS 4.8 or a price reflecting 25% of the weighted average of the share in the last 30 trading days.
At the same time, Searchlight will pay another NIS 225 million to Internet Gold for a full stake in the universe it currently owns (19.363 million shares). Internet Gold itself will also invest another NIS 310 million against the allocation of G-bonds of the universe in a similar amount and at a pari price and a maturity date of November 2024.
In the universe, the company will use the proceeds to repay debts of NIS 840 million to existing bondholders, NIS 226 million will be used to fully repay bonds in the Series B universe, while NIS 614 million will be used to repay part of the existing Series C.
What made the breakthrough in the negotiations over the past two days and Sarcelite's new offer was the fact that Internet Gold agreed to invest in the universe its proceeds from the transaction of NIS 225 million, as well as another NIS 115 million from its liquidity balances, to enable early repayment of almost 30% Of the Universe and immediate and full repayment of the B's in the universe.
After the deal, Internet Gold will become a company that holds NIS 310 million in Yakum's C bonds, 30 million shares in Yakum and NIS 20 million in cash.

Bezeq is ending 2018 with a loss of NIS 1.1 billion. This compares to a net profit of NIS 1.2 billion recorded in 2017.

Due to the heavy loss recorded during the year that passed, the company's equity shrank to NIS 434 million at the end of the year, compared with NIS 2.1 billion at the end of 2017, a drop of 80%.
The company notes that the transition from profit to loss stems mainly from a loss from impairment of assets in the multi-channel television sector (yes) in the amount of NIS 1.6 billion, and from other expenses of NIS 634 million for early termination of the employer-employee relationship in the fixed-line domestic communications segment.
Bezeq's revenues shrunk by 4.8% in 2018, amounting to NIS 9.3 billion. The decrease in revenues resulted from a decrease in revenues in all of the Group's main operating segments.
Following Bezeq's loss, the Company's Board of Directors resolved to cancel the dividend distribution policy. In a report sent to the stock exchange this morning, it was written that the board of directors decided that it would not be correct to maintain a dividend policy when in fact it is ineffective, and that the decision was made "in circumstances created by the inability to distribute a dividend due to expectations of non-compliance with the profit test in the next two years."
At the same time as the financial statements for 2018, Bezeq is publishing its forecast for 2019. According to the company's forecast, net profit for shareholders is expected to range between NIS 1.0-0.9 billion, EBITDA is expected to be NIS 3.9 billion, and CAPEX (payments for investment in fixed assets and intangible assets) is expected to be NIS 1.7 billion.
Bezeq's board of directors approved the filing of a prospectus for the issuance and exchange of bonds and an increase in the company's share capital, with the aim of preserving the financial strength of the company from a long-term perspective.
The board of directors of Bezeq also approved the convening of a general meeting on whose agenda approval would be given to increase the share capital of the Company, as a preliminary step towards raising potential capital for the Company in the amount of NIS 2 billion. Bezeq notes that as capital raising is carried out, the process of issuing rights will enable a rapid reduction in debt, an improvement in coverage ratios, maintaining a high rating, and financial flexibility for investment activities and operational activities.

Bezeq Group is expected to cut up to 800 positions over the next three years. The cuts are expected to take place in the subsidiaries of Bezeq - Bezeq International, Pelephone and Yes.
Not all the cuts will be reflected in layoffs. The company aspires to cancel as many jobs as possible under a streamlining procedure, in which no employees will be replaced and various standards will be canceled. The group has already stopped hiring new employees instead of employees who left or retired a few months ago, with the goal of cutting down as many jobs as possible - to avoid as much as possible dismissal.
For this purpose, Bezeq also wants to present voluntary retirement plans that will offer increased benefits to employees who retire, but contacts with the workers' committees of the various companies are only at the beginning of the process, and at this stage it is not clear when the plans will be presented.
The layoffs will be more or less equal to the size of the companies. In other words, 40% of the redundant employees are expected to be in Pele-Phone, the larger subsidiary, and the remainder is divided equally between Bezeq International and Yes. However, it should be emphasized that the subsidiaries in the Bezeq Group have collective agreements that will not be easy to open. Therefore, it is expected that the dismissal process will take place only after reaching the summaries. Now the negotiations are only in its infancy.
It appears that the number of layoffs will actually be lower, as companies are already stopping new recruitments.
"The chairman of the cellular, Internet and high-tech workers union, Yaki Halutzi, rejects the publications and calls on Bezeq's board of directors to honor the collective agreements signed by them. Companies have agreements that regulate the retirement of workers with the consent of the employees' representatives only. Bezeq's board of directors must come to its senses and stop the unnecessary celebrations and attempts to harm Pelephone's employees and Bezeq International. In addition to signing agreements by the end of 2019, the Histadrut will not harm the status of any employee in the company and will not hesitate to act by all means at its disposal. "

Bezeq's revenues declined by 4.7% and amounted to NIS 2.3 billion in the 3rd Q, compared with NIS 2.4 billion in the corresponding quarter last year. The decrease in Bezeq's revenues is due to a decrease in the revenues of all of the Group's principal segments.

 The results of the quarter reflect the impact of the growing competition environment and the company is making significant moves that will bear fruit over time, but since the beginning of 2018, the company has shown stability in profitability, inter alia due to a decrease in operating expenses. "
Bezeq continues to present erosion in revenues and operating profit. The number of active lines at the end of the third quarter was 1.84 million, a decrease of 5% compared to their number by year. The average monthly income per subscriber fell to NIS 51, compared with NIS 54 a year earlier. In the field of Internet lines, Bezeq presents stability in the number of subscribers of the group and the average monthly revenue per Internet subscriber stands at NIS 93.
Bezeq's operating profit fell 21% in the third quarter of 2018, and net profit shrank by 27.3% to NIS 234 million, compared with net income of NIS 322 million in the corresponding quarter last year.
The subsidiary Pelephone presents a 4.9% decrease in revenues for the third quarter. The bulk of the decrease is due to a 10.9% contraction in revenues from the sale of equipment. Pelephone's net profit plunged 75% in the third quarter of 2018 to NIS 6 million, compared with a net profit of NIS 24 million last year. At the beginning of the third quarter, Pelephone lost 426,000 subscribers and two thousand subscribers. The reduction of subscribers led to an increase of about NIS 11 in the average monthly revenue per Pelephone cellular subscriber.
In the third quarter of the year, YES received a 9.6% decrease in revenues, which totaled NIS 367 million. The decrease in revenues is mainly due to a decrease in the average income per subscriber and a decrease in the Company's customer base. The average monthly income from YES subscribers fell to NIS 210 in the third quarter, compared with NIS 215 in the previous quarter and NIS 226 in the corresponding quarter last year. The decline in the prices of Yes's packages manages to stop the abandonment of subscribers. In the third quarter of 2018, yes had 584,000 subscribers, compared with 597,000 subscribers a year ago. In the last two quarters, yes, however, has been able to increase its subscriber base by two thousand per quarter compared to the previous quarter.

Bezeq's revenues in the second quarter of 2018 amounted to NIS 2.33 billion, compared with NIS 2.46 billion in the corresponding quarter last year, a decrease of 5.3%. Net profit in the second quarter of 2018 amounted to NIS 195 million compared with a drop of 45.5% %. The decrease in net profit was mainly due to the decrease in revenues and from the provision for employee retirement in the amount of NIS 80 million. The decline in the valuation of Pelephone's activity amounted to NIS 1.5 billion - NIS 3.9 billion, at the end of June. 
Operating profit in the second quarter of 2018 amounted to NIS 371 million, compared with 



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