UPDATE 2-Egyptian tycoon to buy MTS fiber network in new Canada push

Fri May 24, 2013 5:08pm EDT
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* MTS to sell Allstream business for C$520 mln

* MTS shares jump more than 5 percent in Toronto

* Deal could result in MTS becoming takeover target

By Alastair Sharp and Euan Rocha

TORONTO, May 24 (Reuters) - Manitoba Telecom Services Inc will sell its Allstream fiber optic network to a company controlled by telecom tycoon Naguib Sawiris for C$520 million (US$503 million), a deal that signals the Egyptian magnate is still keen on Canada.

Under an agreement announced on Friday, Accelero Capital Holdings, which was founded by Sawiris and is stacked with executives from telecom companies he owns or in which he is invested, gets Allstream landline network and its 50,000 business customers.

Investors cheered the deal, which marks a re-entry of sorts for Sawiris into the Canadian market, sending MTS's stock up more than 5 percent to C$33.93.

"Immediately it removes a couple of clouds from the stock, one relating to Allstream and just how long it would take to turn them around, and two, they can use the proceeds to help fund their pension deficit," said Ryan Bushell, a portfolio manager at Leon Frazer & Associates in Toronto, which manages more than C$2 billion and is one of MTS's top shareholders.

The deal's value includes debt assumed by the buyer. MTS expects its roughly C$405 million in proceeds to help it pay around C$130 million into its pension plan and eliminate all pension solvency funding until 2016.   Continued...