Target: TDC A/S
Price: $15.3 billion
Buyers: Apax Partners, Kohlberg Kravis Roberts & Co.,
Providence Equity Partners, Permira Advisors and The
Financial Advisors: Seller: Goldman Sachs; Buyer:
Enskilda Securities, JPMorgan and Deutsche Bank
Legal Advisors: Buyer: Simpson Thacher and Bartlett
It’s been 17 years since Kohlberg Kravis Roberts & Co. made its storied run at RJR Nabisco in a deal that remains unsurpassed in size-more than $30 billion. That figure looms as astonishing even today, especially considering the hardscrabble, cloaked-in-mystery state of private equity in the late-80s.
In the intervening time, the private equity industry has evolved from the junk bond-backed bad boys of Wall St., whose techniques were linked to scandal and sneered at by the financing establishment, to a global, established asset class, with several hundreds of firms, regularly attracting top flight-and reputable-managers and financiers.
But in all those years-and despite all that growth-no one has ever come close to the size of the RJR deal.
But on Nov. 30, we got another new second place.
In what could turn out to be the second largest buyout of all time and the largest ever private-equity backed buyout in Europe, Denmark’s largest phone company, TDC, agreed to sell to a PE consortium for 382 Danish crowns per share in cash, or $14.5 billion. The total price tag, including debt, is $15.3 billion. The participating funds are Apax Partners WorldWide, KKR, Providence Equity Partners, Permira Advisors and The Blackstone Group.
The deal surpasses the pending $15 billion buyout of Hertz, which itself surpassed the $11.3 billion buyout of SunGard Data Systems Inc., completed in August. By one reported figure, of the top 10 all time LBOs, eight have either closed or been agreed in 2005.
A source familiar with the matter said members of the TDC buyout consortium had been interested in buying the firm for a long time, but it wasn’t for sale. Providence, Apax and Permira had had conversations with SBC Communications in 2004 before it sold its 42% stake in TDC.
Providence, Apax, Blackstone and Permira spoke with TDC in early 2005, with KKR joining the group later, said the source. TDS solicited other interest but it’s unclear if there were any other bids.
According to the source, in the week leading up to the deal, Blackstone president Tony James and Providence CEO Jonathan Nelson flew to Copenhagen to speak with TDC chairman Thorleif Krarup. The group then entered round-the-clock face-to-face meetings in the offices of TDC’s law firm in Copenhagen until a deal was struck. Dag Skattum of JPMorgan led the buyside advisory work, negotiating with Gordon Dyal of Goldman Sachs, which represented TDC. The TDC board approved the deal after midnight on Nov. 30.
Though the board approved the bid, it reserved the right to sell to a competing bidder. Though the chances of that happening appears unlikley. A competing bid was rumored to be in the works from Cinven, Silver Lake Partners, Apollo Management and BC Partners, which were potentially going to link up with Swisscom.
However, the Swiss government said recently it would block any attempt by Swisscom to acquire outside its borders, dealing a blow to that group. Moroever, the buyout team that made the offer controls 10% of TDC’s stock, a partial blocking position.
Barclays Capital, Credit Suisse First Boston, Deutsche Bank, JPMorgan and Royal Bank of Scotland are financing the deal, which is expected to close in January.