Ananda Made Instant Profit from 25% Sold to Saudi

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Jun 26 2007
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Immediately after Maxis Communications Berhad (KLSE: MAXIS, stock-code 5051) stocks stop trading on the stock exchange due to privatization, Ananda Krishnan found a new buyer for his cash-cow. Reuters reported that Saudi Telecom Co., the largest Arab telecom firm, is to buy 25 percent of Maxis in a $3.04 billion (11.4 billion riyals) deal to gain access to Indonesia and India, and complete south-east Asia’s biggest buyout.

Saudi Telekom (SAU:
7010) said it would buy into Malaysia’s largest mobile operator by investing in tycoon Ananda Krishnan’s firm Binariang, Maxis Communications’ biggest shareholder. The Saudi firm will also take 51 percent of Maxis’s Indonesian unit and invest in its Indian network, getting access to 1.4 billion people in two of the world’s four fastest growing mobile markets. The Saudi operator would consider increasing its stake in Maxis to a maximum 30 percent allowed in Malaysia, Chief Executive Saad al-Duweish said, declining to give the price it paid per share.

Earlier, Krishnan has teamed up with other Maxis shareholders to buy the 41 percent of Maxis they do not own in a $4.7 billion bid that priced the stock at 15.60 ringgit per share. Saudi Telecom, controlled by the government of the world’s largest oil exporter, appears an ideal partner as the only Gulf Arab telecom operator with zero debt on March 31. Saudi Telecom has lots of cash which Maxis needs for operations that hold huge growth potential.

Based on the simple mathematic, 25% stake in Maxis should translate into $2.86 billion assuming Saudi Telekom is paying the same price Ananda paid for the 41 percent from the privatization which closed on Monday. So, Ananda made a paper gain of $180 million ($3.04 minus $2.86 billion) from the sale, a cool 6.3 percent instant profit. Not bad considering Ananda is free to buy and sell whenever he wishes to without have to go through the tedious process of getting approval. But is that what he wants from the privatization? I doubt so, this tycoon definitely has better evil plan for Maxis.

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