KKR, GIP nab a $16 billion telecom consolation prize from Vodafone

Vodafone Group Plc has agreed to sell a stake in its towers unit to KKR & Co. and Global Infrastructure Partners in a deal valuing the business at €16.2 billion ($16.3 billion).

The British telecommunications group announced the €32-a-share deal for Frankfurt-listed Vantage Towers AG in a statement Wednesday that confirmed an earlier Bloomberg News report. This represents a 19% premium to Vantage’s three month volume-weighted average share price.

Under the deal’s terms, Vodafone will move its 81.7% holding in Vantage into a joint venture with KKR and GIP. The JV will then make a takeover offer for outstanding shares in Vantage in what could be the biggest take private of a German company on record, data compiled by Bloomberg show. RRJ Capital, the second-largest minority investor in Vantage, will support the offer.

Shares in Vantage rose as much as 12% following the deal’s announcement. The stock was trading above the offer price at €32.90 at 12:44 p.m. in Frankfurt, suggesting some investors see the possibility of minority shareholders asking for a higher price. Vodafone was down 1.4% in London.

Vodafone took Vantage public at €24-a-share in an initial public offering in March 2021. Less than a year later, Vodafone’s Chief Executive Officer Nick Read said it would consider selling down its stake in the business while continuing to share control. The KKR and GIP consortium will eventually own as much as 50% of the JV.

“This transaction successfully delivers on Vodafone’s stated aims of retaining co-control over a strategically important asset, deconsolidating Vantage Towers from our balance sheet to ensure we can optimise its capital structure and generate substantial upfront cash proceeds,” Read said in Wednesday’s statement.

Saudi Arabia’s Public Investment Fund is helping to fund the deal, Read said on a separate call with reporters. A representative for PIF declined to comment.

Tower Tussles
For KKR and GIP, the Vantage deal comes just months after they failed in a bid to buy a controlling stake in Deutsche Telekom AG’s tower arm, which was eventually sold to Brookfield Asset Management Inc. and DigitalBridge Group Inc. in a deal valuing the business at about €17.5 billion.

KKR and GIP faced strong competition from a host of financial and strategic bidders for Vantage, including a consortium of Spanish telecommunications group Cellnex Telecom SA and Singapore’s sovereign wealth fund GIC Pte.

Network towers are helping dealmakers defy a near-30% slowdown in global mergers and acquisitions activity this year. Telecom operators are shifting the assets to help raise funds for fiber-optic rollouts and wireless upgrades, and are finding willing buyers in the form of investment firms seeking predictable returns in volatile markets.

Bloomberg News reported this week that PIF is among suitors weighing a final bid for network towers being sold by Qatari telecom firm Ooredoo QPSC that could be valued at as much as $5 billion. And in Europe, private equity firm EQT AB is seen as the frontrunner to acquire a stake in French tower owner TDF.

UBS Group AG and Robey Warshaw LLP advised Vodafone on the deal. Morgan Stanley advised the KKR and GIP consortium. Bloomberg