City sugar daddies mulling £10bn bid for EE, say sources

Big names in private equity have started talks on a potentially hefty £10bn buyout bid for UK 4G network operator EE.

Investment firms like Apax, KKR, Blackstone and CVC Capital Partners are rumoured to be working on consortiums for competing offers for the network formerly known as Everything Everywhere, according to whispers heard by both the Financial Times and The Reg.

The gossip is that the companies will stick around £3bn of their own dosh in the deals, but they'll be looking for the rest of the money from banks, making this one of the biggest acquisitions of its kind since before the recession.

A leveraged buyout like this was pretty common before the crash, when free money ran like shiny rivers through the corporate world. Using a large proportion of borrowed cash would make the EE deal the biggest leveraged buyout since KKR laid hands on British pharmacy chain Alliance Boots for £12bn towards the end of the so-called Buyout Boom, from 2005 to 2007.

The last big telecoms and private equity agreement in Europe was in 2006, when a group including Apax, Blackstone and KKR snagged Denmark's biggest telco TDC for £7.7bn.

For a potential EE deal, the private equity firms are also looking at letting France Telecom and Deutsche Telekom, the operator's current owners, to hang on to a stake of 15 to 20 per cent, the insiders told FT.

The owners have been working on the possibility of an IPO for EE since late last year, making it an attractive prospect if the buyout firms can persuade them that they'll get good money from staying private since the market for lending to corporations has started to improve. France Telecom CEO Stéphane Richard said last year the many private equity firms had expressed interest in EE, but both owners wanted to "keep control of the asset" and they would only sell off bits of the operator.

Apax, KKR and CVC declined to comment on the rumours while Blackstone had not responded by the time of publication. A Deutsche Telekom spokesperson contacted El Reg to say:

DT and FT are very confident in the management strategy... DT and FT have decided to conduct a strategic review on the asset and consider different options with an IPO as the preferred option. We expect to conclude the strategic review in the course of 2013. As before, we do not comment on specific speculations.

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