British Telecom Group shares fell today after the U.K. government warned that it could intervene in any bid for the telecom giant. But news that inveterate deal-maker Patrick Drahi, through Altice, raised his stake in the telco to 18% not only puts the group firmly in play but also serves as a reminder that mega-buyouts are on the agenda for 2022.
Altice said it has no intention to make a bid for BT and so is barred from making an unsolicited move for six months under British takeover rules. This situation — as well as the U.K. government's terse statement that it would "not hesitate" to act to protect national infrastructure assets — explains both the 5% decline in BT's shares today and unchanged bond prices.
Even so, BT is clearly in play as an asset, and there are signs that entrepreneurs and sponsors are once again looking at the very largest of buyout targets in Europe. Also in telecoms, KKR made a €33 billion nonbinding offer including debt in November for Telecom Italia SpA, thereby sending the company's shares rising and bonds falling. Telecom Italia's bonds have subsequently firmed amid speculation that the offer would struggle to find favor with both the Italian government and largest shareholder, Vivendi, although the stock price has moved up in recent days on talk that KKR is preparing to make a formal offer.
KKR's bid for Telecom Italia is said to be backed by a €45 billion financing commitment, which would easily be the largest buyout ever syndicated globally. That record is still held by another KKR-linked deal, resulting from the $45 billion takeover of Texas Utilities that brought a debt financing across bonds and loans of roughly €20 billion equivalent. The deal was eventually restructured.
For Europe, despite post-crisis record volumes in loans and all-time records in high-yield in 2021, mega deals have largely been absent, bankers note. The largest overall deal package syndicated in 2021 is the roughly $14.32 billion loan and bond financing backing the buyout of U.S.-based Medline, which only included a $500 million-equivalent loan for Europe. The largest buyout syndication in Europe in 2021 came from the acquisition of T-Mobile Netherlands, which included a €2.4 billion term loan and €1.35 billion two-part bond offering. This still does not fall into the global top 20 of large buyout deals in Europe, however, and it's necessary to go back to the €7.6 billion debt package supporting the acquisition of ThyssenKrupp Elevators by Advent, Cinven and RAG in 2020 for the region's last true jumbo deal.
Jumbo transactions should return in early 2022 as the market gears up for the launch of the £5.4 billion financing backing CD&R's £9.7 billion takeover of U.K. supermarket group Morrisons. The moves near BT and Telecom Italia suggest that others could follow too, and bankers say sponsors in Europe need to act decisively if they want to continue to raise such large amounts of dry powder. Indeed, Europe may yet be presented with another familiar name after it emerged that Walgreens has lined up Goldman Sachs to explore options for its British operation Boots. KKR and Stefan Pessina's take-private of Boots in 2007 remains the largest European buyout to date, even if the supporting debt package never fully syndicated. A buyout this time around is unlikely to be of the same size as then but could still value the chain at roughly £6 billion, according to reports.
Story links
LBOs
Morrisons rating cut by Moody's ahead of leveraged buyout financing
Leveraged loans
Compleat wraps term loan add-on backing acquisition
Secondary markets
BT shares fall as government pours cold water on takeover bid
S&P ELLI: Loans gain 0.02%; year-to-date return is 4.59%