CVC in talks to buy TDC’s Swiss Unit for US$3 Billion

If sources are to be believed, CVC Capital Partners Ltd is planning to buy TDC’s Sunrise unit for US$3.3 billion.

The company in November agreed to sell the unit to France Telecom, with the plans to merge it with its Orange unit in Switzerland but the deal failed in June as the regulator rejected the merger. Regulatory said that the Sunrise sale may have hindered plans by TDC’s private-equity owners closer to sell their five-year investment in the Danish phone company.

Sunrise is Switzerland’s No. 2 operator after Swisscom AG. It gets roughly three-quarters of its revenue from wireless, with the remainder coming from fixed-line services.

According to the John Strand, it looks like a good, realistic price. There’s no doubt Sunrise is doing well, stealing market share from Orange, and the Swiss franc is up.”

CVC is paying for the deal, valued at US$3.3 billion, with roughly one-third of its own cash and two-thirds borrowed funds, which is suggestive of the funding mix private-equity firms used before the financial crisis. More recently, with bank lending more scarce, private-equity firms have put up closer to half the purchase price in a number of cases.

According to sources, the TDC-France T©l©com deal, aimed at competing more effectively with Swisscom, was scuttled amid regulatory opposition earlier this year. CVC approached TDC’s owners soon after that deal fell apart.

CVC is paying a pretty diffident amount about six times of its recent EBITDA for Sunrise, which has little or say no debt.

Private-equity firms Apax, Blackstone Group, Kohlberg Kravis Roberts, Permira and Providence Equity Partners took TDC private in a US$12 billion deal in 2006, at the time Europe’s largest-ever leveraged buyout. The private-equity firms had been looking for an offering of TDC shares earlier this year, but those plans were complicated by the collapse of the France T©l©com deal. The prospect of an offering will likely be revived now.

According to the close sources, Proceeds from the Sunrise deal will likely be used to repay debt the private-equity firms saddled TDC with. That could pave the way for a TDC share offering as early as the fourth quarter of this year.