CVC Capital Partners Ltd, a private equity fund, agreed to buy TDC A/S’s Swiss unit for 3.3 billion Swiss francs ($3.25 billion), paving the way for a share sale by majority owners of Denmark’s largest telecommunications company.
TDC, which is about 88 per cent owned by private equity funds, expects the all-cash sale of Sunrise Communications AG to be completed in the fourth quarter, the Copenhagen-based company said today in a stock exchange statement.
The sale marks the second attempt by TDC to divest Sunrise after an accord with France Telecom SA to merge the Swiss operations with the French company’s Orange unit was blocked by regulators in Switzerland. While the CVC deal is less favourable than the France Telecom offer, it may allow TDC’s private-equity owners to sell their investment, said Jan Dworsky, an analyst at Handelsbanken Capital Markets in Stockholm.
“The price is slightly less than what they would have gotten from France Telecom,” he said. “It probably paves the way for the share sale to be back on track; if not this year, in the first half of 2011.”
TDC rose as much as 6 per cent in Copenhagen trading. Before today, the stock has dropped 14 per cent this year, valuing the company at 41.65 billion kroner.
TDC was acquired by private-equity firms Blackstone Group LP, KKR & Co, Apax Partners LLP and Permira Advisers LLP in 2006. It has remained listed on the Copenhagen Stock Exchange as ATP, Denmark biggest pension fund, refused to sell its stake. TDC said last year that it may be heading back to a full listing on the stock exchange.
The Sunrise purchase would be CVC’s eighth globally this year. CVC manages a ¤10.8 billion ($14.2 billion) leveraged buyout fund.
Private-equity firms have led more than $103 billion of takeovers worldwide this year, more than double the $44 billion they logged in the same period a year ago.
“This is a good deal for TDC and for CVC,” Henrik Poulsen, chief executive officer of TDC, said in a telephone interview. Asked about the share sale, he said, “our owners are still undertaking their strategic review of the company, and this has not been concluded.”
Deutsche Bank AG and BNP Paribas SA acted as advisers to CVC, while Morgan Stanley and UBS AG advised TDC. For TDC, the purchase price is a “fair valuation,” said Poulsen. “The valuation is lower than in a merger situation because of the synergies that would have existed, but it’s an all-cash deal, unlike the France Telecom deal,” he said.
The sale will result in an after-tax gain of 650 million Danish kroner ($114 million), the company said. European mobile-phone operators are looking to consolidate operations as revenue growth slows in some countries. France Telecom and Deutsche Telekom AG this year completed a deal to combine their U.K. operations, surpassing Telefonica SA’s O2 unit as the largest U.K. operator.
Sunrise had about 20 per cent of the Swiss mobile-phone market last year, Orange had 18 per cent, while Bern, Switzerland-based Swisscom, the country’s largest operator, had 62 per cent.
TDC expects sales this year to be on the same level as in 2009 and sees earnings before interest, taxes, depreciation and amortisation to increase 2 per cent from last year.
“We have been working for four years on a strategic plan to refocus TDC on the Nordic region,” Poulsen said. “With today’s announcement we have completed that journey.”
