KKR, Carlyle said to eye bids for SingTel's Australia unit

By Stephen Aldred and Saeed Azhar

HONG KONG/SINGAPORE (Reuters) - Private equity firms KKR and Carlyle Group are among the suitors lining up bids for Singapore Telecommunications Ltd's Australian unit, Optus Satellite, people familiar with the matter said, a business valued at more than A$2 billion.

SingTel, Southeast Asia's largest telecom operator, is battling tepid growth in its key markets of Singapore and Australia, and the funds raised from the sale would help it plough cash into faster-growing businesses.

France's Eutelsat Communications SA, Blackstone Group and Providence Equity Partners are also expected to bid, the people said. SingTel is inviting first round offers by June 14, one of the people said.

 

Eutelsat has lined up a corporate adviser, while KKR & Co and Carlyle are discussing deal financing with banks, the people added.

SingTel, controlled by Singapore state investor Temasek Holdings, sent out financial information to bidders on Monday, the people said, after announcing a strategic review of the business in March. SingTel's Optus business sells TV, telephony and broadband services to more than 2 million subscribers in Australia and New Zealand.

The suitors are attracted to the steady cashflow generated by the business as well as low capital expenditure required, the people added.

SingTel is hoping the auction will receive a boost from debt funding from the U.S. made available by its advisers Credit Suisse and Morgan Stanley . The two banks are providing a loan of around A$1.7 billion that buyers can use for the acquisition, said two of the people.

Eutelsat was not immediately available for comment. Blackstone, Carlyle, KKR and Providence declined to comment. The people declined to be identified because the sale process is confidential.

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Optus Satellite operates a fleet of five satellites, with another, Optus 10, scheduled for launch in 2013. SingTel, which acquired the satellite arm when it bought Optus in 2001 for $14 billion, has been struggling to increase its earnings because of slowing growth in Singaporean and Australian mobile phone subscriptions and problems at Indian associate Bharti Airtel.

Optus Satellite had EBITDA (earnings before interest, tax, depreciation and amortisation) of around A$225 million for 2012, two of the sources said.

SingTel also has stakes in Thailand's Advanced Info Service Pcl and the Philippines' Globe Telecom . In January it agreed to sell its entire 30 percent stake in Pakistan's Warid Telecom to a unit of the Abu Dhabi Group for $150 million.

Australia accounted for 65 percent of SingTel's revenue in the financial year 2012.

Buyout loans from the United States surged to a record $287 billion in the first quarter, according to Thomson Reuters LPC, a trend that underscores a return in risk appetite among investors.

The financing package from Credit Suisse and Morgan Stanley is around seven times Optus' EBITDA, a leverage level not seen on a buyout in Australia since before the financial crisis.

Australia's commercial banks have refused to lend more than around four or five times earnings on any buyout deal in recent years, which is prompting the move to tap U.S. funding. Despite the higher cost of U.S. financing, higher debt levels increase returns when private equity firms exit an asset.

KKR's head of Australia, Justin Reizes, at a conference in March said he sees the availability of such loans opening up more opportunities for private equity buyouts in Australia. (Reporting by Stephen Aldred; Additional reporting by Kevin Lim in Singapore; Editing by Denny Thomas, Michael Flaherty and Chris Gallagher)