French billionaire and Eir owner Xavier Niel is joining rival Patrick Drahi in taking his phone company private after customer losses and heavy spending sent its shares into a steady decline.
Iliad shares jumped as much as 62pc to Niel's offer price of €182. The deal values Iliad at about €10.85bn, according to Bloomberg calculations.
Niel has a 71pc stake in Iliad, which is the majority owner of Eir.
Iliad shook up the French market more than two decades ago with its low-cost cable TV and Internet services. Lately the industry's focus has shifted to combined fiber broadband, mobile and TV, forcing Iliad to redouble its network investment.
Rock-bottom interest rates have made it cheaper for owners to withdraw their businesses from the constant scrutiny of equity markets.
Drahi took his Altice Europe vehicle private in January, partly as a way to avoid paying for promised stock buybacks and focus his spending on reducing debt and network investments. Germany's Oliver Samwer is also attempting to take his tech incubator Rocket Internet off the stock market.
Iliad's shares have lost almost a third of their value in the past 12 months. New Street Research analysts put Iliad's fair value at €220 a share.
"In reality though, shareholders are likely to tender in our view given the recent share price performance," they said in a note.
The industry has fallen out of favor with equity investors in recent years as it gears up for big spending on 5G wireless and fiber networks. While they are needed for carriers to remain competitive, national regulators are likely to limit returns on those investments.
The pandemic-driven surge in home working has driven home the importance of the networks that drive the digital economy, yet phone companies' profits have barely budged due to fixed-price data plans and fierce competition.
Deals for European companies in tech, telecom and media have surged in the last two years, with buyers agreeing to spend about $124bn so far in 2021, keeping pace with last year's record, according to data compiled by Bloomberg. Acquirers offered about $215bn for European companies in the industry in 2020, the most in 20 years.
Niel owns around 71pc of Iliad through his holding company, according to Friday's statement.
He's resorting to the junk bond market to help finance the buyout. A €3.6bn bridge loan via the holding entity arranged by BNP Paribas, Credit Agricole CIB, JPMorgan and Societe Generale will eventually be replaced by high-yield debt, according to a draft prospectus.
Iliad's new Italian business has begun to turn a profit and Niel now has his sights on Poland, where it's offered to buy Liberty Global Plc's operation in the country for around $1.9bn to expand its fixed-line business there.
"Iliad is now entering a new phase in its development, requiring rapid changes and major investments which will be easier to undertake as an unlisted company," Niel said in the statement.