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Private Equity Company Sends BT Cable Arm Value to £ 40BN

Private equity companies and mutual funds are expanding the size of BT’s Openreach division. This is because the telecommunications giant is prepared for the potential turmoil caused by its largest shareholder, Patrick Drahi.

Potential suitors (including private-equity funds CVC and Apax, infrastructure investors Brookfield and Macquarie) could price the cable sector £ 40 billion, sources said in an email on Sunday. He said he had made a new analysis of the value of. ..

Bankers are preparing for a potential bidding war over potential stocks or the entire open reach caused by dry pressure.

Connections: BT’s Openreach division could be spun off and bankers are preparing for a potential bidding war

Franco-Israeli’s telecommunications giant Altique UK acquired a 12.1% stake in BT in June, worth £ 2.2 billion.

The six-month period that prevents him from initiating an acquisition under city rules will expire on December 11.

It fuels speculation that Dry may put pressure on the board to buy more shares and sell Openreach’s shares, or even the entire, which owns the infrastructure that connects most UK homes. increase.

BT has hired Robey Warshaw, a boutique investment bank that employs former Finance Minister George Osborne to strengthen corporate defenses.

This situation has led bankers and investors to scrutinize BT and Openreach. Barclays and another major investment bank conducted a recent survey valuing Openreach at around £ 26 billion. This is much higher than the £ 18-20 billion price tag resulting from the analyst split this spring.

However, one senior source said: ‘In reality, Openreach is twice as valuable. Europe’s telecommunications infrastructure assets have a bit of a gold rush. It’s definitely undervalued, and looking at profit forecasts, it could be worth more than £ 40 billion.

Buyout giant KKR has begun individual bids of € 33 billion (£ 28 billion) against Telecom Italia, with KKR rivals CVC and Advent reportedly showing interest.

Sources say: All private equity houses and investment banks are running numbers in BT and Openreach.

Pressure: Investor Patrick Drahi makes a big investment in BT

Pressure: Investor Patrick Drahi makes a big investment in BT

According to sources, CVC and Apax may form part of a consortium rather than acting alone.

Macquarie, an Australian investment bank also known as the “Vampire Kangaroo,” owns UK infrastructure assets such as Southern Water and East Yorkshire’s fiber broadband company KCom. Brookfield, Canada owns an open fiber network of professionals through the UK Utilities Division.

BT, Altice, CVC Brookfield and Macquarie declined to comment. Apax could not be reached.

So far, Dry has presented heartfelt photos of his relationship with BT and publicly supports Philip Jansen’s strategy to provide full-fiber broadband to 25 million households by the end of 2026. doing.

But Altice has a terrifying reputation for cost savings in Europe. The group is currently trying to sell its Portuguese division. This has the potential to fund the next move in Dry.

Dry’s options include holding or increasing his stake, attempting a full acquisition of BT, or forcing a partial or full sale of Openreach, or giving large dividends to shareholders. increase. Given the size of the group, pension fund debt and potential political hurdles, a complete acquisition is unlikely.

German giant Deutsche Telekom can play an important role in supporting or opposing Dry’s plans. The company has repeatedly suggested that it may consider a 12% stake, and CEO Tim Hottges said this month “all options remain open.”

Jansen has openly considered the possibility of selling shares through an Openreach joint venture to fund the deployment of full fiber broadband. However, he ruled out this idea earlier this month and instead chose to fund the rollout itself.

BT was privatized under the Margaret Thatcher administration in 1984, but huge debt and its huge pension deficit are hampering stocks. Amid the revival of dry earnings and dividends, this year’s share price has so far risen 13% to £ 1.54 per share, with BT valued at £ 15.3 billion.

The end of the dry lockup is an important point for BT.

Last week, the move to a new headquarters in Aldgate, London was completed, and this week former ITV boss Adam Closia became chairman.

We are also considering selling BT Sport arms.

Matthew Howett, founder of consultancy Assembly Research, said:

But he added: “Spin-out is by no means a simple process. The government has a keen interest in network assets and the pension system is a can of worms.”

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Private Equity Company Sends BT Cable Arm Value to £ 40BN

Source link Private Equity Company Sends BT Cable Arm Value to £ 40BN

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