Denmark's TDC owners target share sale jackpot

COPENHAGEN, DENMARK: The private equity owners of Denmark's TDC set the price range on Thursday for the planned sale of a quarter of the telecommunications company, a deal which could land them $2.4 billion plus a share buyback payout.

The share sale is the latest example of private equity firms making the most of stronger equity markets to cash in on bets which are now several years old. It follows a successful debut offering by Danish jeweler Pandora last month.

And it will be Europe's third-biggest public stock offering this year, following a $3.61 billion initial public offering by Italy's Enel Green Power and a $2.74 billion IPO by Polish insurer PZU.

TDC's main owners -- private equity investment firms Apax Partners, Blackstone Group, Kohlberg Kravis Roberts, Permira Advisers, and Providence Equity Partners with some 88 percent of the stock -- won control of TDC in a 2005 buyout which was Europe's biggest at the time.

They are now selling 210 million shares plus an overallotment of 31.5 million shares, and set an indicative price range of 47-56 crowns per share. That makes the offering worth between 9.87 billion and 13.52 billion Danish crowns ($2.4 billion) if the so-called "greenshoe" option is exercised.

The private equity owners are effectively cashing in twice as they are also set to benefit from a 9 billion Danish crown share buyback, part of a releveraging of TDC.

"It is a way for the owners to extract additional money from the company," said a source close to the deal.

The sellers will still own about 55 to 60 percent of TDC after the sale, Chief Executive Henrik Poulsen said.

"In other words, that means that the (free) floated share will come to between 40 and 45 percent," Poulsen said. That is based on an assumption that minority owners would keep their shares and not offer them to TDC in a buyback, he added.

The precise amount will depend on how much of the greenshoe is sold to new investors and on which existing shareholders subscribe to a share buyback of up to 9 billion crowns by TDC.

"All existing shareholders can participate in the buyback including current minority shareholders, so that is another variable to take into account -- the extent to which minority shareholders will take part in the buyback or not," he said.

Middle of range

TDC shares ended up 0.2 percent at 53.65 crowns, in the middle of the indicated range, putting the market capitalisation at about $9.5 billion. The stock slightly underperformed a 0.4 percent rise in the STOXX Europe 600 telecoms index .

"In the middle of the price range, it is fairly priced in comparison to the European telecom sector," Danske Capital chief analyst Jesper Poll said. "It is hard to say where in the price range it will land -- it is very dynamic."

TDC says its most comparable European peers are Belgium's Belgacom, KPN of the Netherlands and Swisscom of Switzerland. But its main rivals in its home Nordic market are Swedish-Finnish TeliaSonera and Norway's Telenor.

While not a flotation, the planned sale has been handled like an IPO. It gives the owners a partial exit and effectively relaunches TDC on the Copenhagen bourse.

TDC's stock has been largely illiquid since a leveraged buyout five years ago.

JP Morgan, Morgan Stanley and SEB are joint global co-ordinators and bookrunners for the offering. Deutsche Bank and UBS are joint bookrunners.

Credit Suisse, Goldman Sachs, Nomura, HSBC and Danske Markets are joint lead managers. Danske Markets and SEB are Nordic retail bookrunners, with BNP Paribas and Carnegie co-lead managers.