TPG, Apax Raise Hellas In Greece –

There was plenty of speculation as to whether Italian communications giant Telecom Italia SpA was going to spin off TIM Hellas Telecommunications SA, the Greek cellular phone unit of its TIM International N.V. arm, or if it was going to attempt a turnaround in-house. Private equity interest in the wireless provider was reportedly strong when, in February, the company announced that it had given exclusivity rights to buyout shops Texas Pacific Group and Apax Partners if Telecom Italia indeed decided to sell the division. And sure enough last week, a deal was struck for the telecom carevout.

Apax and TPG will acquire TIM International’s 80.87% shareholding in TIM Hellas for EURO1.114 billion (approximately $1.4 billion), which works out to about EURO16.43 ($21.29) per share. The price represents a 17.6% premium of TIM Hellas’ six-month average ADR price based on the current exchange rate.

The transaction, expected to close by July, is subject to regulatory approval and other closing conditions. Upon completion of the acquisition of TIM International’s shares, TPG and Apax will likely purchase the remaining shares of TIM Hellas at the same price of approximately EURO16.43 per share, through a cash merger under Greek law.

After being on both firms’ radars for more than a couple years, Apax and TPG teamed up on the deal in late October 2004, Giancarlo Aliberti, a partner, at Apax Partners, told Buyouts. “The reason [TIM International] decided not to go on with a formal auction is due to our experience with telecom and the fact that we had been previously looking at Greece as a place to invest in,” Aliberti said.

Founded in July 1992, TIM Hellas serves more than 2.3 million customers and is the country’s third largest mobile phone operator. Its services include contract and prepaid GSM network packages, business services and value added services. More than 800,000 of TIM Hellas’ customers are contract users while about 1.6 million are prepaid customers. Around 43% of the company’s contract customer base are business customers.

While Europe’s private equity scene has been blowing up, Greece has seen relatively little action compared to the U.K., France and Germany. “To our knowledge there have not been any significant change-of-control buyouts in Greece. More commonly, there have been a number of growth capital and minority investments,” Texas Pacific Group Partner Philippe Costeletos said, adding that this deal could likely be the spark that ignites more PE-backed activity in the country.

Aliberti agrees. “Growth in private equity investing in Greece is bound to take off. As we know, this not something that will happen in the short term, and this transaction certainly represents a spike since there has been very little [private equity] activity in the country. But this is a landmark deal that will be noticed by others and will definitely spur interest in the Greek marketplace.”

For fiscal year 2004, TIM Hellas reported sales of approximately EURO840 million (approximately $1.07 billion) and operating income of approximately EURO121 million (approximately $155 million).

“Growth in TIM Hellas will be an organic venture,” Costeletos said. “If you look at the overall penetration of the mobile phone market and compare it to the active penetration in Greece, it is lower [in Greece] than in other European countries. So there are a number of opportunities that can be taken by the company.”

Apax Europe VI, a fund that closed in 2004 with a total of $3.75 billion will cover Apax’s equity portion of the deal, while the $5.3 billion TPG Partners V LP and the $377 million T3 Partners II LP, will be tapped for TPG’s share.

Debt financing will be provided by JPMorgan and Deutsche Bank.