Turkey Wealth Fund gains controlling stake in Turkcell

iSTANBUL

Turkey’s sovereign fund announced early on June 18 that it has agreed to acquire a controlling stake in the country’s leading GSM operator, Turkcell, using its recently given power to acquire stakes in strategic companies.

“Turkey Wealth Fund [TWF] has agreed to acquire 26.2 percent of the shares of Turkcell İletişim Hizmetleri AŞ by entering into a series of transaction agreements with, among others, Telia Company, LetterOne, Çukurova Holding and Ziraat Bank,” the fund said in a statement.

“TWF becomes the largest shareholder in Turkcell and gains effective control over the board of directors, via 15 percent privileged shares within its 26.2 percent shareholding, providing TWF with an ability to appoint five directors out of nine,” it added.

As part of the takeover, Swedish telecom company Telia divested its 24.02 percent indirect stake at Turkcell for $530 million and exited the company.

Telia had a 47.1 percent holding in Turkcell Holding, which owned 51 percent of Turkcell İletişim. Turkish firm Çukurova and LetterOne, founded by Russian tycoon Mikhail Fridman, also owned stakes in the holding company.

Turkcell Holding joint venture is effectively terminated and Çukurova Holding, owned by Turkcell founder Mehmet Emin Karamehmet, exited its indirect interest in the GSM operator.

LetterOne increased its ownership and acquired, via a restructuring of its current interest in Turkcell Holding, a direct minority interest of 24.8 percent in Turkcell.

Minority shareholder rights are strengthened as four of nine board members can be elected without TWF privilege rights.

Shareholders intend to support Turkcell’s existing dividend policy going forward, the statement said.

Turkcell continues to be the only company headquartered in Turkey that is dual listed in Borsa Istanbul and the New York Stock Exchange.

“I am confident that the Turkey Wealth Fund will expand Turkcell with added value. The partnership of the TWF and Turkcell will deliver a historic performance in the global trade and business world,” said Turkish Treasury and Finance Minister Berat Albayrak in a tweet.

Zafer Sönmez, the CEO of TWF, said Turkcell has a significant potential to expand in the post-pandemic world.

“We intend to support Turkcell management in its focus on innovation and their strategic initiatives such as 5G infrastructure while the company continues its pioneering role in product and services innovation,” he added.

TWF, founded in 2016, holds all or part of the shares of 20 Turkish companies including flag carrier Turkish Airlines, telecommunications giant Türk Telekom, state lenders Ziraat Bankası and Halkbank, oil company Turkish Petroleum and stock market Borsa Istanbul.

Acquiring the shares of the GSM firm was TWF’s first international transaction. In April, the Turkish parliament passed a legislation allowing the fund to buy stakes in strategic companies.

The acquisition is expected to close during the second half of 2020, subject to obtaining regulatory clearances and the approval of the revised Articles of Association by the shareholders in Turkcell’s Annual General Assembly Meeting.

Turkcell shares rose 5.8 percent in Istanbul in early trade.

'Turkey Wealth Fund to raise value of Turkcell'

TWF will raise the value of leading telecommunications firm Turkcell after acquiring a controlling stake in it, the country's finance minister said on June 18.

The TWF and Turkcell partnership will show a historical performance in the global trade and the business world, Berat Albayrak tweeted.

End of 15-year deadlock

A dispute between Telia and Çukurova over a share sale to control Turkcell started in 2005 and later snowballed into litigation and led to corporate governance difficulties.

The sale is expected to result in a capital loss of 3 billion Swedish crowns ($322.15 million), Telia said in a statement.

Analysts at DNB said the exit was positive, as it allowed Telia to focus on its core Nordic and Baltic operations.

“But the price is less than 50 percent of market cap which is low,” the bank said in a note.

Telia CEO Allison Kirkby said the transaction was unlocking a long-lasting deadlock, reducing risk, improving leverage, increasing liquidity and providing fresh shareholder returns.

“It will be a board decision what we want to do with dividend,” she told a telephone news conference.