Report: EE could be target of £10B private equity buyout

Private equity firms are ramping up their efforts to secure funds for a possible £10 billion bid to acquire EE, the UK's largest mobile operator, according to a report in the Financial Times..

The report, citing unnamed sources, said a deal is now more likely following likelihood of the this week's $24.4 billion (£15.6 billion) buyout of PC vendor Dell. The report said that the buyout firms are in negotiations with EE's joint owners--Deutsche Telekom and France Telecom—about them retaining a shareholding of up to 20 per cent, according to the Financial Times.

Two private equity groups, Apax and KKR and another led by Blackstone and CVC Capital Partners, are developing competing offers for EE that could see a £7 billion debt package raised to finance the acquisition, according to the report. In this situation, the private equity firms would look to place around £3 billion of their own funds into the deal. All of the private equity firms declined to comment, according to the report.

However, while EE reportedly would prefer an initial public offering, its owners could be persuaded to accept a straightforward sale if the private equity offer meets their expectations and is fully-financed, according to FT. The FT report comes days after the Sunday Times reported that EE's owners are preparing the company for a £10 billion IPO, according to unnamed industry and banking sources.

Talks with banks are advanced, but are constrained by the private equity firms having only limited access to detailed financial information about EE, a condition to table formal bids, reports the FT.

If such an offer appears it would be the largest private equity deal in European telecoms since the acquisition of a majority stake in TDC, Denmark's largest phone company, by a group including Blackstone, Apax, Permira and KKR in 2006.

EE is presently deeply involved in the bidding process for UK LTE spectrum, which could cost the operator as much as £1 billion in licences. The firm is already operating LTE on refarmed 1800 MHz spectrum, providing it with an enviable head start over its rivals.

For more:
- see this FT article (sub. req.)
- see this Sunday Times article (sub. req.)

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