Ardian, with 32%, and an Oak Holdings vehicle backed by GIP, Vodafone and KKR, with 39%, are exploring a bid for the roughly 29% of the Italian tower company they do not own. The minority stake is worth about €1.9 billion at Monday's price, before any premium.
Italy's largest mobile-tower operator may be about to leave the stock market, and its controlling shareholders are working out how to pay for it.
Ardian, the French private equity firm, and Oak Holdings 1, an investment vehicle backed by co-investors GIP, Vodafone and KKR, are exploring an offer to buy out the minority shareholders of INWIT, according to people familiar with the matter. They are discussing financing with banks, and Abu Dhabi investment firm Mubadala is expected to take a stake as part of the plan, one of the people said. Deliberations are continuing.
Ardian, GIP, Vodafone, KKR and Mubadala declined to comment. INWIT said it did not have any information on the matter. GIP is part of BlackRock.
The first session
INWIT shares rose 3.27% to €7.255 in Milan on Monday morning, the first trading session since the plan was reported, and touched €7.375. The company's market value is about €6.55 billion.
Ardian owns about 32% of INWIT and Oak Holdings about 39%, leaving roughly 29% in other hands. At Monday's price, that minority stake is worth about €1.9 billion. A takeover would usually require a premium on top, and the bank financing under discussion would have to cover it.
Why now
The timing coincides with a dispute with INWIT's two largest customers. Telecom Italia and Fastweb have both started procedures to terminate their tower contracts with INWIT in an effort to renegotiate them on better terms. Uncertainty over contracts with the company's two biggest customers has weighed on the shares.
That dispute cuts both ways for a buyout. It may have made the stock cheap enough to interest the controlling shareholders, who know the business well. It also means any buyer is taking on the outcome of a negotiation with customers that are trying to pay less.
INWIT has been the subject of takeover speculation since February, when reports said Ardian and Brookfield were interested in taking it private.
Two readings
One reading is that this is a classic take-private by owners who see more value than the market does. Tower assets suit patient infrastructure capital, the minority stake is a manageable size for a well-financed group, and a new investor such as Mubadala would bring fresh money.
The other is that the minority holders face a buyer with an information advantage at a weak moment. The controlling shareholders sit closer to the customer negotiations, the dispute depresses the share price, and an offer pitched just above it could leave outside investors with a modest premium on a temporarily discounted base.
What to watch
A formal offer with a price, the details of financing, any statement from INWIT's board and the outcome of the talks with Telecom Italia and Fastweb will determine what the minority shareholders are offered.