Market sources have poured cold water on the prospect that private equity firms would be able to make a successful counter-bid to the US$12.85bn offer by Portuguese conglomerate Sonae for Portugal Telecom.
Although Warburg Pincus, BC Partners, Texas Pacific Group, Apollo Management, Silver Lake Partners and Bain Capital are reportedly interested in putting together an offer for Portugal Telecom, key peers, such as Providence Equity, Blackstone and Quadrangle, are not, sources said.
This might be partly because Blackstone and Permira were, along with Apax, Permira and KKR, part of a five-strong club deal that snapped up Portugal Telecom’s Danish equivalent, TDC, for US$15.2bn just last month and might not have room to digest another very large deal.
But sources said the key factor for buyout firms interested in Portugal Telecom would be negotiating with the government, which holds a golden share and therefore could veto strategic changes, such as a takeover, and nominate the company’s chairman.
Sonae has expressed confidence that it can handle this issue.
And Sonae’s bid is well-timed: foreign trade rivals such as Telefonica and France Telecom are busy, while Deutsche Telekom has hesitated on such expansionary moves before.
Sonae’s financing would come from a leveraged buyout-type arrangement, with Spain’s Santander publicly backing the bid. Although a private equity consortium bid might not succeed this time (and it is still very early stages), the same structure might well do so through Sonae – as it did when Egyptian entrepreneur Naguib Sawiris fought off a Blackstone-led consortium and paid US$15.15bn for Italy’s Wind.