Carlyle and Advent exit to Telenor

In a further indication of the return of trade buyers, Telenor has made two simultaneous acquisitions providing exits for private equity firms to the tune of US$1.05bn.

The Norwegian telecommunications giant has agreed to buy Sweden’s second-biggest broadband provider, Bredbadsbolaget (B2), for US$822.5m and Denmark’s third-largest provider, CyberCity, for US$236.4m.

The deals, which were auctioned separately, provide profitable exits for two sets of private equity firms. Advent International, which was advised by Alfred Berg, led two rounds of venture capital investment in CyberCity in 2000 and 2001. The 2001 round also saw investment by Lehman Brothers, Merrill Lynch, Nordic Venture Partners and Four Seasons Partners.

Carlyle and Sweden’s Investor had originally invested in B2 in 1999 but bought in Access Industries, the US-based industrial conglomerate of Len Blavatnik, in 2001. At exit, Access held 41%, Investor 29% and Carlyle 22%, with management and others the remainder. The vendors were advised by Deutsche Bank and Carnegie.

Telenor’s purchases follow its inter-Scandinavian bidding war for Sweden’s Song Networks, which was eventually bought by Denmark’s TDC for SKr5.5bn in November, and is seen as a sign of the growing importance of broadband networks.

The vendors of B2 had considered an IPO, but Telenor fought off trade and private equity interest, reportedly from Apax and Advent, by paying a reported 12 times expected 2005 earnings. One source close to the deal said trade buyers were able to outbid financial sponsors for broadband operators even though many had turned cash-generative because they remained difficult to leverage and their peers could gain cost savings.

Telenor already owns Danish mobile operator Sonofon, while it runs its Swedish operation under the Telenor brand. Goldman Sachs advised it on its B2 purchase while Nordea advised on CyberCity, which was founded in 1995.