Irish businessman Denis O'Brien has scrapped the potential $2 billion flotation of his Caribbean and Pacific islands telecoms company Digicel less than 72 hours before its shares were due to begin trading in New York.
The company blamed the shock move on weak stock market conditions. The decision has placed a question mark over Digicel’s future growth, given that about $400 million from the share sale had been earmarked for up to 15 acquisitions in cable television, high-speed fibre and corporate services.
In a statement issued after the markets had closed in the US last night, Digicel said there had been “significant support” for its IPO from a “high quality group of investors” but current market conditions had impacted on the transaction’s “momentum” over recent days.
“Given our growth outlook, an IPO for Digicel was optional and predicated on achieving fair value for the company,” Digicel’s chairman and co-founder Mr O’Brien said. “Recent volatility in equity markets has seen a number of IPOs listing at a discount to their signalled price range and this was a less attractive route for us.”
Mr O’Brien added that Digicel was at a “key juncture” in its growth story following a $1.5 billion investment programme over the past three years.
“We generate strong and growing free cash flow and we have no material debt maturities until 2021,” he said. “Our growth plans remain unchanged and we remain in a strong position to exploit areas of interest in data, business solutions, cable TV and broadband.”
Mr O’Brien, who controls almost all of the stock in Digicel, had intended to offer 124 million shares in the company at between $13 and $16 a piece. This would have valued the business at between $1.6 billion and $2 billion and made it the second biggest US flotation this year.
Digicel and its advisers had intended to price the shares tomorrow with the stock beginning to trade on Friday.
Sources last night suggested that investors had indicated they were only willing to pay between $9 and $11 a share. A number of IPOs in the US have failed to reach their target price in recent weeks.
This will be a major blow to Mr O’Brien, who had been plotting the IPO for several months. While he would not have benefitted financially directly from the share sale – as the proceeds were to have been used to reduce the company’s $6.3 billion debt and to pursue acquisitions – it would have placed a paper value of up to $1.2 billion on his remaining 60 per cent equity share in the business.
Digicel started in 2001 with a mobile licence in Jamaica. It now operates in 31 markets in the Caribbean, Central America and the Pacific islands and has 13.6 million subscribers. It has a market share of more than 50 per cent in 21 of the countries in which it operates.
In the year to the end of March 2015, Digicel made a net loss of $157.6 million on revenues of $2.8 billion.
The plan put to investors would have involved Mr O’Brien relinquishing about 40 per cent of the equity of Digicel but he would have retained 94 per cent control of the company through special voting shares.
Mr O’Brien has received about $1.1 billion in dividends from Digicel in the past three years.
