SCANA to realize big profit on Powertel sale
SCANA Corp.'s stock jumped 4% Monday, after VoiceStream Wireless Corp. reported it will buy SCANA's 27% stake in wireless phone company Powertel Inc. in a stock deal valued at about $1.2 billion. SCANA, a Columbia, SC,based utility holding company, is expected to profit handsomely on the $249 million it invested 6 years ago in Powertel.
Ann de Rouffignac
SCANA Corp.'s stock jumped 4% Monday, after VoiceStream Wireless Corp. reported it will buy SCANA's 27% stake in wireless phone company Powertel Inc. in a stock deal valued at about $1.2 billion.
SCANA, a Columbia, SC,based utility holding company, is expected to profit handsomely on the $249 million it invested 6 years ago in Powertel.
VoiceStream previously had agreed to be acquired by Deutsche Telekom AG, Europe�s largest telecommunications company in a separate agreement. To ease a proposed combination among Deutsche Telekom, VoiceStream, and Powertel, Deutsche Telekom agreed separately to acquire Powertel.
The proposed acquisition by Deutsche Telekom of Powertel is expected to close immediately after Duetsche Telekcom's acquisition of VoiceStream. The VoiceStream/Powertel deal will not close, if the Deutsche Telekom/VoiceStream closes, the companies reported.
�There are two deals here. The Powertel/ VoiceStream or the Powertel/Deutsche Telekom,� said William Timmerman, chairman and CEO of SCANA in a conference call. �It (Powertel) will be acquired by one of them.�
Terms differ depending on which deal closes first. Under the VoiceStream/Powertel merger agreement, Powertel shareholders will receive VoiceStream common shares at a conversion ratio ranging from .65�if the average closing price of the VoiceStream stock is $130.77�and .75�if the price is $113.33 or below. If the Deutsche Telekom deals goes through first, Powertel shareholders will receive 2.6353 Deutsche Telkom shares for each Powertel share.
Based on closing market prices of Deutsche Telekom and VoiceStream on August 25, respectively, SCANA would have recorded an aftertax gain of about $850 million with the Deutsche Telekom merger or an after-tax gain of $650 million with the VoiceStream merger.
At the earliest, the sale of the securities will actually take place the second quarter of 2001.
Timmerman said the company will use the proceeds from the sale of its stake in Powertel once a merger is completed to repurchase stock and reduce debt. He would not elaborate on how the winnings would be split between equity and debt reduction. Once the balance sheet is improved, Timmerman says resources will be freed up to concentrate more effort in the Georgia retail natural gas distribution market. In that completely deregulated market, SCANA has captured about 30% of the market.
�We still have unfinished business in Georgia," he said. SCANA's Georgia operation is breaking even and an injection of resources is needed to turn a profit, he explained.
SCANA may also look at additional gas distribution capacity in North Carolina.
Under terms of the deal, SCANA cannot sell all its stock in the new company until 6 months after the deal is complete. Analysts noted that SCANA shares were trading at about $26 before the announcement and were considered undervalued. They inquired during the conference call if there were a way through hedging and other financial maneuvers to buy back SCANA's shares at today�s lower prices instead of waiting.
�We would rather not take a 15% haircut on a deal to get it done early,� said Timmerman.
But the company is evaluating its options, he said.