Three competing groups of private equity firms are expected to table bids of up to €12.5bn for Spanish telecom company Auna. Auna has been the subject of buyout rumours for around a year, but last month shareholders recruited Merrill Lynch to formalise an auction. The deadline for non-binding indicative bids is May 23.
Alliances within the private equity consortia have been shifting, while certain groups have also been reappraising the portion of the business that they intend to target.
Providence and Carlyle have been backing Spanish cable company ONO’s €2.6bn bid for Auna’s cable assets for several months. In the last two weeks, they have been joined by Blackstone and Permira, and have been encouraged to bid for the entire Auna portfolio by shareholders.
Blackstone was bidding previously for the entire company as part of a group that also included Apax and CVC. These two firms are still looking to acquire Auna in its entirety, having brought in Cinven as their new running mate. Market sources said that group had offered just over €12bn for Auna.
But a group comprising KKR, BC Partners and Goldman Sachs is ahead on price, offering around €12.5bn for the telecom company. Analyst sources said that the offer represented a fairly good price, although Spanish bank BSCH described the level as insufficient at a presentation of first-quarter earnings last Tuesday. BSCH holds 27% of Auna, while electricity company Endesa has a 32% stake and utility Union Fenosa controls 18.6%. Prior to the appointment of Merrill Lynch, the shareholders had said they would conduct an IPO of the company in 2006.
Jose Antonio Alvarez, BSCH’s chief financial officer, said Merrill Lynch had been instructed to maximise value and that there was no set timeframe for disposal of the stake. Spanish analysts said the bank could be looking to encourage one of the other groups to top KKR’s offer, however.
The buyout rumours first solidified late last year. Blackstone, Apax and CVC brought in Providence and Carlyle in December for an €11bn offer for the entire company after their €8bn bid for the Amena mobile unit was rejected earlier last year. But Auna’s three largest shareholders were unwilling to sell at €11bn, a figure that they said would undervalue the company.
Blackstone and Providence have worked together recently on a number of failed bids in the European telecom sector. They were part of the consortium that lost out on Italian-based Wind, and also teamed up on a failed attempt to acquire a majority stake from the Czech government in the auction for Cesky Telecom.
Apax is also an experienced telecom investor. It recently partnered with Texas Pacific Group to take control of Greek-based TIM Hellas for €1.1bn.
Auna is the best candidate to challenge Telefonica in Spain, one of Europe’s fastest growing telecom markets. Auna’s fixed-line and mobile units combined have more than 11m customers. Around three-quarters of its €4.2bn sales in 2004 were generated from the mobile unit.
There may also be strategic interest. Telecom Italia sold a 27% stake in Auna to the other shareholders in 2002. America Movil, owned by Mexican business magnate Carlos Slim, has the backing of some parties within the Spanish government. Slim controls Telmex, the main competitor of Telefonica SA in Latin America. Merrill may also offer Auna to Orange, a unit of France Telecom
Spain has been one of the busiest buyout markets this year, and there is more current action. A group of private equity firms is circling Occidental Hotels in the run-up to the deadline for indicative bids on May 15.
Goldman Sachs is running the auction and shareholders Mercapital and La Caixa are hoping that the business will sell for up to €1bn. CVC, Apax, Candover, Carlyle and Permira are among the potential financial bidders for the business. Trade interest could also emerge from Accor or Meridien hotels.