Billionaire entrepreneur Xavier Niel has launched a tender offer to take private Iliad, the French telecoms company he founded 22 years ago, in a surprise change of strategy by one of France's richest men.
It is the latest example of buyers taking advantage of the low valuations of listed European telecoms companies.
Another French telecoms billionaire, Patrick Drahi, took his Altice Europe group private last year, and in June took a big stake in BT Group. Private equity buyers have also been circling European telecoms companies.
Mr Niel already owns roughly 71 per cent of the share capital of Iliad, the mobile and broadband provider that rose to prominence as a price-cutter in France.
He bought a majority stake in Eir in 2018 for €3.5 billion. Iliad has a 31.6 per cent stake in the Irish telecoms group through an entity called Toohil Telecoms Holdings. NJJ, Mr Niel's private investment vehicle, holds 32.9 per cent – also through Toohil.
The balance of Toohil is held by Anchorage Capital (26.6 per cent) and Davidson Kempner Capital Management (8.9 per cent).
Iliad has an option to increase its 31.6 per cent Eir stake to almost 59 per cent in 2024 by buying out most of NJJ’s share.
Iliad, which markets its offers under the brand name Free, has also built a mobile business in Italy from scratch and made its first major acquisition last year when it took over Polish mobile operator Play.
The tender would offer existing shareholders €182 a share, about a 50 per cent premium on the average share price over the past month, the company said in a statement.
“From now on, a new phase of development for Iliad will require quicker transformations and significant investments that will be easier to carry out as a private company,” Mr Niel said in a statement. “Our ambition for Iliad is to accelerate to become a leader in telecommunications in Europe.”
Iliad shares jumped 61 per cent to just above the offer price on Friday morning, giving it a market capitalisation of €10.85 billion.
Before the announcement, Iliad shares had lost a third of their value this year. Investors have been concerned about heavy investments in Italy and an intense price war in France.
European telecoms operators are also facing significant capital spending to build 5G and high-speed fibre broadband networks.
With the tender offer, Mr Niel has again signalled that he thinks the markets are undervaluing Iliad and its prospects. He had first done so in 2019 when he boosted his control by buying back a chunk of the capital for €120 a share as the stock stagnated at half its all-time highs.
Iliad has further growth ambitions and has said it wants to expand into offering broadband in Italy and Poland. On Friday, it announced it had made a non-binding offer to John Malone's Liberty Global to buy its Polish cable operator UPC for $1.9 billion including debt. Both companies said negotiations would continue.
Separately from Iliad, Mr Niel's NJJ Holdings owns other telecoms assets, such as Switzerland's Salt Mobile.
He has also been an active investor in property and led an activist campaign at Unibail-Rodamco-Westfield last year, eventually spending more than €1 billion to buy a 13.6 per cent stake in Europe’s biggest shopping centre operator.
Iliad’s board had “welcomed” the tender offer, the company said, and has set up a committee to review its fairness and terms for minority shareholders.
JPMorgan and Lazard are advising Mr Niel. BNP Paribas, Crédit Agricole and Société Générale will organise the tender offer. – Copyright The Financial Times Limited 2021