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Private equity firms including KKR and Cerberus are considering a challenge to Softbank’s Y1,700bn-Y2,000bn ($14.3bn-$16.8bn) proposed bid for Vodafone’s Japanese mobile phone unit.
“A lot of [private equity firms] are looking to make a counter bid, including us,” a representative of a large US private equity group active in Japan said on Friday. “I think it’s a total free-for-all.”
The prospect of a takeover battle could come as welcome relief to Arun Sarin, Vodafone’s chief executive, who has been under pressure to scale back the group’s global ambitions and return the proceeds of disposals.
He is expected to update the market on Vodafone’s strategy after the Japanese sale, highlighting the importance of scale in regions such as Europe, the US and southern Africa.
Large buy-out groups, which have raised billions of dollars to invest in Asia, view Vodafone’s Japanese business as a rare opportunity to secure a substantial foothold in Japan’s recovering economy.
“This is made for private equity,” said one investment banker. “It is an established business from a quality seller. It’s not distressed, although it has real issues, and there is cash flow.”
The private equity groups declined to comment, and people close to the situation cautioned that talks among buy-out funds could still collapse. One warned that it could take a month for the groups to decide whether to bid, but said: “Everyone is focused on this.”
Vodafone would not comment on private equity interest but a spokesman said it remained “very confident about going forward with Softbank”. Any counter-offer would have to involve several funds, and one private equity executive said he had been contacted by various competitors looking to put together a consortium.
“There is an awful lot of activity around the Vodafone situation,” he said. “We have had contacts and we are monitoring the situation very, very closely.”
Vodafone, which took a stake in the Japanese operation in 2001 and now owns 97.7 per cent, has struggled to make a mark in the fiercely competitive Japanese market.
It has lost customers to NTT DoCoMo and KDDI and encountered technological hurdles to achieving economies of scale.
Softbank is believed to be aiming to buy a majority stake for between Y1,700bn and Y2,000bn in a leveraged buy-out. One analyst estimated that it could inject Y300bn in cash, leave Vodafone with about Y400bn in preference shares, and raise the remainder through bank borrowings or outside investors.