LONDON/FRANKFURT (Reuters) – British mobile phone giant Vodafone (VOD.L) has decided against bidding for Germany’s largest cable televison operator Kabel Deutschland, leaving a cluster of private equity firms in the driving seat.
“We reject media reports along these lines,” a spokesman for Vodafone Germany said when asked if Vodafone was bidding.
Reuters reported this week that private equity firms including Advent, BC Partners and Carlyle were set to submit offers and could team up because of the amount of equity that would be needed to launch a credible bid.
Bankers said Kabel Deutschland could sell for up to 5 billion euros ($6.89 billion), in what would be the largest leveraged buyout in more than two years and that up to four billion euros of leverage was available for the transaction.
BC Partners [BCPRT.UL] and CVC Capital joined forces late on Tuesday for a combined offer, two people said, confirming an earlier report in the Financial Times.
Bain Capital is also considering an offer, but has not yet decided whether to make a bid, two people said. Hellman & Friedman and Blackstone (BX.N) have also taken a look at the business, banking sources said.
Kabel Deutschland, which is active in 13 of Germany’s 16 states, declined to comment.
It said on Wednesday its nine-month core profit was 486 million euros and that it aims to reach 660 million in earnings before interest, tax, depreciation and amortisation in its 2009/2010 fiscal year, which ends on March 31.
KDG’s core profit is the measuring stick for the purchasing price.
The cable operator is 88 percent owned by Providence Equity Partners, 8 percent by Teachers’ pension Plan and 4 percent by management. Its chairman, Tony Ball, is a former CEO of BSkyB.
Morgan Stanley, Deutsche, UBS, JP Morgan, BNP Paribas and Societe Generale are providing staple financing for the deal, indicating the bids are fully financed, two bankers said.
The banks have put together a package of financing options that include a bridge loan to a high-yield bond, another banker said.
The inclusion of the high-yield bond facilitates a lower equity cheque than the standard 40-50 percent that has characterised post-crisis deals, several sources said.
Kabel Deutschland is also sounding out options for an initial public offering (IPO).
(Reporting by Alexander Huebner, Philipp Halstrick and Peter Maushagen in Frankfurt; Kate Holton, Victoria Howley, Quentin Webb and Simon Meads in London)