British telecoms and retail group Carphone Warehouse has agreed to buy the British assets of Italian Internet services provider Tiscali for £236 million in cash, free of debt.
Tiscali, with more than €600 million ($800 million) in debt, said separately its board of directors had approved key terms of a debt-restructuring plan using the proceeds from the sale and a possible capital increase of up to €210 million.
Carphone's acquisition of Tiscali UK, which has been on the block since last year, will make it the UK's biggest residential broadband provider, overtaking Virgin Media, and the second-biggest including business customers after BT.
Carphone will acquire 1.45 million subscribers to add to its 2.8 million. BT has 4.7 million and Virgin 4 million.
Carphone said today it would fund the acquisition entirely from existing debt facilities, and expected it to close by end-June, subject to competition authorities and Tiscali's obtaining formal approval to restructure its debt.
Meanwhile, Tiscali Chairman and Chief Executive Mario Rosso told a conference call the debt restructuring plan would be finished by June 5th. Key creditors, Intesa Sanpaolo and JP Morgan, jointly hold about €350 million in debt, he said.
Shares in Tiscali were up 4.3 per cent at 0.45 cent by 10.39am in volatile trade. Carphone traded up 6.5 per cent at 167.5 pence.
Tiscali, Italy's third-biggest ISP by market share, suspended long-term debt payments in March. It said today it expected company founder Renato Soru to back the capital increase and to underwrite part of it.
Carphone said it saw an immediate benefit of 10 per cent to its earnings per share for its fiscal year to March 2010, and said the acquisition would enable its TalkTalk brand to realise annualised savings of £40 million to £50 million by March 2011.
"We are delighted to be acquiring Tiscali's UK business - we know the business well and the fit with TalkTalk is perfect," Carphone chief executive Charles Dunstone said in the statement.
Analysts reckoned Tiscali could have fetched twice the price a year ago, but its debt problems, uncertain future and global economic woes have undermined its value.
Reuters