France Telecom threatens jumbo Auna buyout

Private equity consortia that tabled bids of around €12bn for Spanish telecom Auna on July 11 face competition for the group’s mobile jewel in the crown after a last minute intervention from a rehabilitated France Telecom.

After nearly collapsing under €70bn of debt three years ago, France Telecom (FT) has confirmed that it is considering an offer for Amena, Auna’s mobile subsidiary. Analysts have estimated the price tag at about €9bn or 8.2x Amena’s Ebitda, compared with a sector average of around 6.2x.

France Telecom, which tapped BNP Paribas to advise on the process, has re-emerged as a contender after many bankers ruled it out because it did not bid around July 11.

FT is up against two private equity groups. Providence Equity Partners, Blackstone, Permira and Carlyle are also bidding about €9bn for Amena, under advice from Lehman Brothers, Morgan Stanley and Deutsche. Debt for this bid is expected to come from JP Morgan, CSFB, BNP Paribas and Barclays Capital.

Ono, a rival Spanish telecoms company, is bidding with Providence, JP Morgan Partners, Quadrangle and Thomas H Lee for Auna’s fixed line assets. JP Morgan is sole adviser to the group, sources close to the Merrill Lynch-led auction said. Debt is lined up from BNP Paribas, Barclays, JP Morgan, Bank of America, ABN AMRO and RBS.

Citigroup and Goldman Sachs are advising the Kohlberg Kravis Roberts-led consortium, which includes Goldman Sachs’ private equity arm and BC Partners. This group is bidding for Auna in its entirety and analysts have suggested that it might benefit from a telecoms partner.

Sources added that Citigroup and Goldman Sachs, alongside Dresdner, HSBC, HVB and Bank of America, were working to provide the debt package for the KKR bid.

The groups are understood to have valued Auna at about €12bn. Shareholders have valued Auna at upwards of €13bn, according to Spanish analysts.

Sponsors and debt providers are monitoring the Wind situation keenly. The market has observed mixed prospects for the loans backing the €12.1bn buyout of Wind, an Italian telecoms company being bought by Egyptian entrepreneur Naguib Sawiris. (See page 11.)

The Auna deal will carry more leverage – over 6x – but is regarded by many as a better credit. “The leads are having to work hard [with Wind], but there is enough liquidity for both deals,” said a banker involved in one of the bids.

Auna is 85%-owned by Spanish bank Banco Santander Central Hispano and two power companies, Endesa and Union Fenosa. BSCH took advantage of a call option granted to it in 2000 to increase its stake to 10%.

Last year, Auna’s owners had considered an IPO instead of a sale but a flotation is more risky than a sale and some analysts believe the shareholders would like to realise their positions sooner rather than later. There have also been concerns about the value of Auna’s phone licences.

There has been some good news on the public market front for private equity sellers in Spain, however. GED Iberian Equity was among the sellers in the IPO of Spanish cosmetic surgery company Dermoestetica two weeks ago. The €136.5m deal is a minnow compared with Amena, but the book was more than 13x covered at the top of the €7.60–€9.10 range.