TDC owners sell down shareholding

TDC’s top manager has insisted he can continue to improve its profitability through cost cutting, as the private equity consortium that controls Denmark’s leading telecoms company started to sell down its shareholding.

Apax, Blackstone, Kohlberg Kravis Roberts, Permira and Providence are set to raise as much as DKr21bn ($3.7bn) through a sale and buy-back of shares at TDC.

The private equity consortium has sold a first tranche of its TDC shares at DKr51 each. Trading in those shares began on Thursday.

TDC has retained a small free float under private equity control, and the shares closed down 5.6 per cent at DKr49.1.

Stock market observers said the TDC share decline on Thursday risked knocking confidence in initial public offerings. While there have been some successful IPOs in 2010, such as Kabel Deutschland, others, including Promethean World, disappointed.

The private equity consortium at TDC bought an 88 per cent stake in the company in 2006, in a $15.3bn deal that was then Europe’s largest leveraged buy-out. The transaction caused intense unease in Denmark because of concerns about asset stripping and job losses.

TDC’s profit margin at the level of earnings before interest, tax, depreciation and amortisation has increased from 28 per cent in 2004 and 2005 to 41 per cent in the nine months to September 30. Henrik Poulsen, TDC’s chief executive, said he expected the 2011 margin to be up to one percentage point higher than in 2010, partly because of further cost cutting.

“We believe we will be able to continue to reduce the cost base in the company by driving productivity and operational improvements,” he added.

The private equity owners have sold 210m TDC shares at DKr51 each, which raised DKr10.7bn for the consortium and should reduce its stake in the company from 88 per cent to 59 per cent. It is one of Europe’s largest share sales this year.

The consortium could also sell a further 31.5m shares at DKr51 each, depending on investor demand over the next month, which would raise an additional DKr1.6bn and should reduce its stake to 55 per cent.

TDC is planning a buy-back, at DKr51 per share, which would raise DKr8.7bn for the consortium.

At DKr51 per share, the pricing was in the middle of the range sought by the private equity consortium, and values TDC at DKr64.7bn, including DKr23.2bn of net debt.