Blackstone may signal which way Wind blows

Blackstone Group’s desire to pitch again for Italian telecom Wind Telecommunicazioni is either a nod to the way the world’s most powerful buyout business is forced to operate during this period of slim LBO pickings or a canny piece of opportunism.

Back in early 2005, Egyptian billionaire Naguib Sawiris unexpectedly saw off a Blackstone-led consortium with a higher offer of €12.2bn (compared with a reported €11.6bn) and the potential for synergies as owner of Egyptian telecom heavyweight Orascom, inherited from father Onsi in 1979.

Since then, there have been several problems on the line for Wind, including the resignation of its chief executive officer before 2005 was out. Tommaso Pompei’s departure was reportedly the result of clashes over strategy with Sawiris and followed both the departure of chief financial officer Marco Alvera and initial concerns regarding syndication of the €7.4bn of debt involved in what was then Europe’s largest leveraged buyout.

This year alone, Sawiris has spent more than €3.5bn on Greek telecoms businesses TIM Hellas and Tellas. Earlier indications had been that Sawiris was looking to float Wind in late 2007 rather than sell any or all of it.

Whether Sawiris is looking to exit Wind as a bad investment or partner with Blackstone is unclear, but a reported €1.5bn to €2bn price tag for a 20% to 30% stake in a business that originally cost a total of €14bn suggests an opportunity for Blackstone, which could be looking to build a significant stake in Wind in advance of a full takeover, especially if Sawiris is considering an imminent exit.

On the other hand, Blackstone is not averse to making unexpectedly minor investments in big telecom businesses. Back in 2006, the New York-based firm paid €2.68bn for a 4.5% stake in Deutsche Telekom on the proviso that a significant stake in a multi-billion euro business would make money for its investors.

Having just closed the world’s largest buyout fund – at US$21.7bn – there is some pressure for Blackstone to deploy capital. Still, with more than 70% already invested and at least another eight years left of the fund’s lifespan, Blackstone doesn’t have to make new investments and can instead concentrate on maximising value on its current portfolio.

How current speculation on Wind shakes out may give an indication on how private equity – or at least it top tier – will move in the current market.