Texas Pacific Group (TPG) likes to buy non-core divisions of major conglomerates it feels can stand alone.
With that philosophy behind it, the Fort Worth, Texas-based private equity firm has agreed to buy the telephone directories unit of Norway’s Telenor ASA, Telenor Media, for NKr5.8 billion (approximately $666 million) in cash.
TPG is paying 16.2 times Telenor Media’s 2000 Ebitda of NKR359 million. The division’s revenue last year was NKR1.66 billion.
Like Dallas-based Hicks, Muse, Tate & Furst Inc. and Apax Partners & Co., which spent GBP2.14 billion ($3.1 billion) to buy British Telecommunications plc’s Yellow Pages business in May, TPG will likely use the acquisition as a platform and look for add-ons as industry consolidation occurs, especially in Europe, according to a company spokesperson. Stephen Peel, managing director of TPG Europe, could not be reached for comment by press time.
But, the spokesperson hastened to add, even without add-on acquisitions, Telenor is a strong performer in its own right, and in a very stable country, which makes it something of a recession-proof business, he said.
Telenor is a Norwegian telecommunications group with business operations in a number of countries in Europe and Southeast Asia. The company is Norway’s leading distributor of voice, information, knowledge and entertainment through a broad range of modern communications services. Telenor became a listed company in December 2000.
Telenor Media makes telephone and business directories for the European markets, and operates online listing services, as well. Telenor has reportedly been looking to sell the division for about six months. The sale of Telenor Media forms part of Telenor’s long-term strategy to focus on core businesses.
“We have maximized cash proceeds from Telenor Media by selling the entire company in a clear and simple cash deal, rather than realizing value through a separate stock exchange listing,” said Tormod Hermansen, company CEO, in a statement.
The company has seen its share price slide to NKR 30.70 last week from NKR 45.5 in February. The company should gain about NKR 5 billion on the deal to help finance its other operations, according to a release.
Deutsche Bank and Credit Suisse First Boston (CSFB), along with the Oslo-based law firm Thommessen Krefting Greve Lund, advised Telenor in the transaction.
Oslo-based Telenor said in January that it planned to sell shares in the unit in an initial public offering. But then the company was contacted by a number of industrial and financial buyers interested in the division, and the IPO plan was abandoned.
Government-controlled Telenor said it would book a gain of NKr5 million from the deal. Company spokesman Steinar Ostermann said the proceeds would be used to cut the company’s debt, which stood at NKR10.8 billion at the end of the first half. The company has been selling its non-core activities.
“We have maximized cash proceeds from Telenor Media by selling the entire company in a clear and simple cash deal, rather than realizing value through a separate stock exchange listing,” said Telenor chief executive Tormod Hermansen.
The TPG spokesperson said it was too soon, “even inappropriate” to discuss a possible exit. He did say that even when a company is exited via an IPO, that TPG tends to keep a very significant stake in the company.
In a similar transaction (in terms of investment philosophy), TPG bought wine maker Beringer Wine Estates from Nestle anuary 1996, and exited that company in August last year for approximately a 3.5 times return on its initial investment. Texas Pacific acquired the company for about $350 million in conjunction with Silverado Partners. At the time, the deal was heralded as one of biggest in the history of the wine industry. TPG then sold the company to Australian Foster Brewing Group Ltd. for $1.2 billion.
In other news, TPG recently invested another $100 million into its portfolio company ON Semiconductor Corp., which TPG bought in 1999 for $1.6 billion. Texas Pacific Group, has more than $3 billion in assets and participates in buyouts, recapitalizations and turnarounds. The firm has invested in technology, telecom, health care, and branded consumer goods companies.
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