Ardian mobile towers pounce would be a mouthful

Ardian’s mobile towers takeover in Italy looks a stretch. The French private equity firm is in the early stages of exploring a bid for 11 billion euro INWIT, in which it already holds a 28% indirect stake, Reuters reported on Wednesday. Buying the rest could cost Ardian 10 billion euros, assuming a modest 20% premium. It would also need UK telco Vodafone to sell the 33% stake it indirectly controls.

Mobile towers are in hot demand among private equity players because of their steady cash flow. INWIT also has more telco operators per tower than rival Cellnex in Italy, according to Morningstar. Long-term leases, already secured with TIM and Vodafone, make the company particularly attractive.

A deal would not come cheap. At 11.8 euros a share, the stock is at a record high. A 20% premium may value INWIT at 17.7 billion euros, including net debt of around 4 billion euros. If the group can deliver an operating profit of 650 million euros in 2025, as per Refinitiv forecasts, Breakingviews calculations suggest the return on investment would be a meagre 3%. That’s below INWIT’s probable cost of capital of 7%. While the Italian group’s shares trade on 16 times its EBITDA for next year, below German-listed rival Vantage Towers’ 20 times, Ardian would need to either pay a stingier premium or rely on growth to make it worth doing. Rueters