Big buyout companies including U.S.-based KKR and Europe's CVC Capital Partners are trying again to persuade banks to help fund a deal they have been unable to get off the ground for the past year, people familiar with the talks said.
They hope that a recent pickup in debt and equity markets could help them broker a more attractive alternative to the stock market listing that EE's owners France Telecom and Deutsche Telekom are planning to better reflect the value of their UK joint venture.
Both Liberty Global 's $15.75 billion acquisition of British cable company Virgin Media and Dell 's buyout led by co-founder Michael Dell and private equity firm Silver Lake involved a significant portion of debt funding and could provide a benchmark for private equity funds interested in EE, the people said.
EE, formerly known as Everything Everywhere, is the biggest mobile operator in the highly competitive British market with more than 27 million customers.
"Virgin has created a window for very big deals and funds are currently contacting banks again to discuss business plans, technical possibilities etc." said one of the people who has been approached by some of the funds.
Two rival private equity consortia KKR and Apax on one side and CVC and Blackstone on the other, are holding early-stage talks with banks and other possible investors, but any bid for EE remains hypothetical, the people said.
BIG STRETCH
To get funding for an EE buyout, private equity firms would have to show how they aim to make money in Britain's mobile market, one of Europe's more competitive with operating margins in the low- to mid-20 range compared with mid-30s for France and Germany.
In recent quarters, margins have nudged down at all of Britain's big three mobile operators - EE, Vodafone and Telefonica's O2, as unlimited voice and data plans are becoming more common, pushing prices down.
Bankers say the private equity firms are seeking debt of around 4.5 times 2013 forecast EBITDA (earnings before interest, tax, depreciation and amortisation), or 6 billion pounds.
"I am not saying it's easy, 6 billion pounds of debt is a big stretch. But it's feasible", one of the lenders said.
The size of the 3-3.5 billion equity part of the funding, which the buyout firms have raised from investors, would be the real problem, he said.
In the deal for Dell, private equity firm Silver Lake Partners is betting its biggest ever equity commitment of about $1 billion. [ID:nL5N0B1HE1}
Plugging the equity gap for EE would require at least three firms to team up, another banker said.
This type of consortium approach has not succeeded since Danish telecom group TDC's buyout for 9.1 billion euros ($12.18 billion)in 2006.
These deals tend to be difficult to execute because private equity funds' backers, known as limited partners, usually prefer each fund to invest in a range different assets to spread risk, rather than take large bets on a single company.
It is also not clear whether EE's owners could be convinced to completely exit the UK, which although a tough market, remains an important one for them in terms of size.
EE's owners are expected to appoint banks in the coming weeks to advise on an possible initial public offering (IPO) this year, bankers said.
EE and all of the private equity firms declined to comment.
No comments:
Post a Comment