Blackstone Group will invest Lt90m ($178m) to take a 51 per cent stake in Lattelecom, the Latvian telecommunications group being privatised through a Lt290m management buy-out.
Lattelecom’s management announced Wednesday that they had chosen the private equity group and a syndicate of four banks to finance the buy-out of Lattelecom from the Latvian government and TeliaSonera, the Nordic telecom.
Nils Melngailis, Lattelecom’s chief executive, said more than 10 private equity funds and 20 banks had offered to finance the transaction, but that fixing terms had been more difficult than he had foreseen, given the global market turbulence and increased concerns over the overheating Latvian economy. “We couldn’t have picked a worse time to look for financing,” he said.
Lattelecom eventually chose Unicredit, Nordea Bank, Parex Bank and DnB Nor to raise Lt200m in euro and lat denominated debt. The management will also invest Lt10m to cover transaction expenses and will hold 49 per cent of the company after the buy-out, which should be completed in November.
The fixed-line telecom group – which made a net profit of Lt39m last year on revenues of Lt144m – sees growth coming from developing its broadband infrastructure, acquiring or launching a wireless operation, and expanding in the Baltic. Mr Melngailis said Lattelecom could take part in regional consolidation and make an initial public offering in three to five years.
The management buy-out follows the government’s refusal last year to allow TeliaSonera to take control of both Lattelecom and LMT, the leading Latvian mobile operator, on competition grounds.
In July, the Latvian government agreed instead a plan to privatise Lattelecom through a management buy-out for Lt290m, at the top end of valuations made by Ernst & Young and Carnegie, the Nordic investment bank.
It aims to simultaneously buy back the 49 per cent stake in the fixed-line operator owned by TeliaSonera and sell the whole company to the management without a tender.
As part of the transaction, TeliaSonera has agreed to take full ownership of LMT. TeliaSonera already directly owns 49 per cent of LMT and has management control.
In a deal that values LMT at Lt668m, TeliaSonera will give the state about Lt130m plus its stake in Lattelecom, and will receive Lattelecom’s 23 per cent stake in LMT and the 28 per cent shareholding owned by the government.