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CMS Hungary Advises CEE Equity on Sale of Invitel Hungary's Residential Business to Digi Communications

CMS Hungary Advises CEE Equity on Sale of Invitel Hungary's Residential Business to Digi Communications

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CMS Hungary has advised Ilford Holding Kft. and Invitel Technocom Tavkozlesi Kft. — controlled by the China Central and Eastern Europe Investment Co-operation Fund, advised by CEE Equity Partners — on its July 21, 2017 sale of 99.99% of the share capital and voting rights of Hungarian telecommunications operator Invitel Tavkozlesi Zrt. to DIGI Tavkozlesi es Szolgaltato Kft., the Hungarian subsidiary of Digi Communications N.V. PeliFilip advised the buyers on the deal.

Pursuant to the SPA, the total consideration to be paid by Digi for the acquisition of shares in Invitel Tavkozlesi is EUR 140 million, though the final price remains subject to further price adjustments. The completion of the Proposed Transaction is subject to the fulfilment of various conditions, including the approval of the transaction by the Hungarian Competition Authority. The deal is expected to close by March 14, 2018.

Invitel Tavkozlesi Zrt. offers a portfolio of services to residential and small business customers, including a variety of multimedia and entertainment services such as interactive, digital and HD television, fast Internet offerings, and fixed telephony services across its regional networks and is positioned as second-largest incumbent fixed line telecommunications and broadband internet services provider in the residential and small business customers segment in Hungary. It reported 2016 revenue of HUF 26 billion (approximately EUR 85 million) and EBITDA of HUF 7.1 billion (approximately EUR 23.2 million) on a pro-forma basis.

Invitech Solutions, the Invitel Group’s B2B and wholesale unit, is not part of the transaction.

The CMS team advising the sellers was led by Partner Aniko Kircsi, supported by Senior Counsel Gabor Gelencser. CMS also advised CEE Equity Partners on the acquisition of its stake in the Invitel Group last winter, with Aniko Kircsi playing a lead role in that transaction as well (as reported by CEE Legal Matters on January 18, 2017). 

The PeliFilip team was led by Partner Alexandru Birsan and Senior Associate Olga Nita.

Editor's Note: After this article was published, Partos & Noblet in co-operation with Hogan Lovells International announced that it worked alongside PeliFilip in advising Digi Communications. In particular, the firm advised on "mandatory Hungarian and English law aspects of the transaction, including the major Hungarian competition law element." The firm's team was led by Partner Sandor Bekesi, with Counsel Akos Kovach taking the lead on the competition side. 

Subsequently, Partos & Noblet in co-operation with Hogan Lovells issued an expanded announcement of its role advising Digi on obtaining merger clearance from the Hungarian Competition Authority, and acknowledging the CMS team's role in advising Invitel.

According to Hogan Lovells, "the clearance is conditional on the divesting of Invitel’s current infrastructure in 16 overlapping settlements and the termination of network lease agreements in a further 25 settlements, where i-TV (a member of Digi Group) provides cable television services through third party infrastructure. These conditions have been made in order to eliminate any potential significant lessening of competition identified by the HCA. The HCA has also appointed a trustee to oversee the maintenance of the value and economic viability of the networks to be divested and ensure the non-solicitation of clients by Digi. In Phase II proceedings, the HCA investigated competition in 34 settlements where the parties’ service areas overlapped. The HCA assessed the lessening of competition in those areas based on current market characteristics, as well as on expected network developments.

Akos Kovach, Counsel at Hogan Lovells, described the matter as, "one of the most complicated merger control proceedings, given the high number of overlapping relevant markets and the complex economic and legal assessment."

The Hogan Lovells team was led by Counsel Akos Kovach, supported by Senior Associate Andras Multas.

The CMS Hungary team included Partner Dora Petranyi and Senior Associate Szabolcs Szendro.

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