HAMILTON, Bermuda (sentinel.ht) – SEC filings this week show that Digicel, whose biggest single market is Haiti, is set to make its debut as an IPO in the United States. Forecasters see the price of the Caribbean telecom giant nearing $10 billion.
Irish telecom billionaire Denis O’Brien will still control over 90% of the voting rights in the company post-IPO, according to the prospectus. His economic stake would be worth more than $3 billion at the top of the IPO price range.
Over $1 billion of the cash raised by the sale of 124 million shares will go toward repaying debt load of $6.5 billion. Digicel isn’t profitable, losing $158 million last year. The company is pitching the stock at $13 to $16 per share. Many estimate the price value will be at $10 billion.
Telis Demos writes in the Wall Street Journal that the deal would be a big one for Digicel’s underwriters in a relatively slow year for IPOs.
He mentions, J.P. Morgan Chase & Co., UBS AG and Citigroup Inc. UBS which also has Ferrari lined up, and Citigroup which is about to hit the road as lead bank on First Data Corp.’s IPO, set to be the year’s biggest at $3 billion. J.P. Morgan is on file to lead medical-tech maker Acelity Holdings Inc., a possible billion-dollar-plus deal itself.
About 13% of Digicel’s revenues comes in Haitian gourdes, and Demos recognizes that this would expose the company to some decent currency risk, which it warns about in the risk factors section of the prospectus. It also takes payment in Papua New Guinean kina, Samoan Tala, Tongan pa’anga, and Vanatu vatu.
An investors’ view on the Caribbean as a frontier market would be key on this IPO. The company is also making other investments in Haiti, which was devastated by an earthquake in 2010. Since then, the company has invested in its headquarters—the Digicel Haiti Tower that survived the quake—and a hotel, and is building tougher infrastructure there, including a co-location center.
Another challenge Demos writes about is fending off deep-pocketed regional competitors like Altice and U.K.-listed Cable & Wireless Communications PLC, which is partly backed by American telecoms investor John Malone after acquiring Columbus International Inc., in which Mr. Malone was an investor. With Mr. O’Brien and Mr. Drahi, that will make it three billionaires vying to control that market.