02's Irish boss in the mix to buy out giant UK mobile operator
Published 17/05/2016 | 02:30
Executives at O2's headquarters are examining the feasibility of a deal that would leave O2 as a stand-alone business, sources said.
O2 chief executive Ronan Dunne is reported to be evaluating a potential £8.5bn management buyout of Britain's second biggest mobile phone operator, after European Competition authorities blocked a takeover deal with CK Hutchison's 3.
He faces comptetition from US billionaire John Malone's Liberty Global. Its already said it would consider buying O2, if the merger with 3 was blocked.
"It would be strange if we didn't evaluate that option," Liberty Global chief executive officer Mike Fries said ahead of the EU decision.
A third alternative would see Telefonica list O2 on the stock exchange. That could raise cash for the parent without entirely exiting the British market.
Britain's 'Daily Telegraph' reported late on Sunday night that O2's Irish-born head, Ronan Dunne, was exploring a debt-financed £8.5bn management buyout attempt, supported by private equity firms, following the collapse of CK Hutchison's takeover bid for the mobile operator.
According to that report, the Dubliner had been approached in recent weeks by potential private equity sponsors aiming to carry out what would be the largest UK leveraged buyout since before the financial crisis.
Mr Dunne had previously indicated his plans to step down from the business, once the takeover by 3 closed.
But with that deal stalled, at least pending any legal appeals, its understood that alternative options are now being considered.
Executives at O2's headquarters are examining the feasibility of a deal that would leave O2 has a stand alone business, sources said.
The price being discussed, at £8.5bn, is well short of Hutchison's £10.25bn offer O2. Its higher price reflects the savings and synergies that the Hong Kong-based owner of 3 would hope to achieve.
According to the 'Telegraph', the MBO discussions are early stage, involving management and potential debt and equity backers, but not - so far - Telefonica.
Among names linked to a potential management led deal are businessman Tom Alexander, the former chief executive of Orange UK, and private equity firms Apax and CVC Capital.
The Spanish owners of O2 are precluded from talking to other bidders under an exclusivity agreement with Hutchison, though that expires in June and could be moot, if regulators won't clear a deal.
Debt financed buyouts had fallen out of favour since the great crash, but the combination of an economic recovery with historically low borrowing costs makes it an increasingly attractive option.
The operator is seen as a good candidate for the manoeuvre, however, because of its strong and growing cash generation.
Sky is also tipped in the mix cicling O2, but as a minority partner rather than buyer. A deal would be a boost to Sky's nascent mobile phone business.
Cable giant Liberty Global, meanwhile, has said it will explore a possible O2 offer, having failed to agree terms with Vodafone on a planned swap of the two group's respective assest in the United Kingdom and Germany.