Axiata and Telenor's mega-merger plan derails due to complexities

Axiata and Telenor's Digi.com said in separate filings to the Malaysian stock exchange that both parties had mutually agreed to end discussions over a non-cash combination of their telecom and infrastructure assets in Asia.
“Over the last four months, both parties have been working on due diligence and finalising transaction agreements to be completed within the third quarter of 2019.
“Due to some complexities involved in the proposed transaction, the parties have mutually agreed to end the discussions,” Axiata said.
However, both parties acknowledged the “strong strategic rationale” of the proposed transaction and did not rule out a possible future transaction.
Trading in the shares of Axiata and Digi was suspended at midday on Friday.
In the statement to stock exchange authority Bursa Malaysia, Axiata chairman Ghazzali Sheikh Abdul Khalid said, “The board acknowledges the strong strategic rationale of the proposed transaction and is equally cognisant of the level of complexity of such a deal that extends across nine countries and 14 major entities.
“Regardless of the expressed synergies of the merger, we are confident that the termination of the proposed transaction does not affect the group in achieving its digital champion ambitions.”
In a separate statement, Digi said its board was informed by Telenor ASA (Telenor), the parent company of Digi’s largest shareholder, Telenor Asia Pte Ltd, that Telenor and Axiata had agreed to end discussions on the proposed transaction.
“The board has been informed that over the last four months, both parties have been working on due diligence and finalising transaction agreements to be completed within the third quarter of 2019.
"Due to some complexities involved in the proposed transaction, the parties have mutually agreed to end the discussions. Both parties still acknowledge the strong strategic rationale of the proposed transaction,” it said.
The Star’s StarBiz had earlier reported all indications point to the mega-merger being called off.
Apart from the sheer complexity of the deal, which involves 14 entities across nine countries, the stumbling blocks involved commercial issues, national and staff interests, and Indonesia’s reluctance to give its blessings, as it sees Norway as being part of the European Union’s pressure on palm oil imports. Without Indonesia as part of the enlarged group, the odds of the deal materialising were basically zero.
“Both parties are trying their level best, as the merger would take them beyond their existing boundaries to create an Asian powerhouse. But the sheer complexity and the very long list of outstanding items surrounding commercial, national and staff interest make it terribly challenging.
“Some items on the list can be modified, some others are not agreeable to both parties, and the deal-breaker items are still hanging. So, with so many items still outstanding, they may just not want to drag on any longer and merger talks may have been halted. They may just call it off," said an industry executive with knowledge of the deal.