Carlyle’s bid talk with Kingston at standstill

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Bid talks between Kingston Communications and Carlyle, the US private equity group, have stalled amid disagreement over price.

The Hull-based telecoms operator, famous for its distinctive white phone boxes, announced in November that it had received an approach about a possible bid, which is thought to have valued the group at more than £400m.

Kingston declined to name the potential bidder, which was later revealed to be Carlyle. The buy-out group is thought to be interested in paying up to 85p a share, which would value the operator’s equity at £437m. Net debt stood at just under £130m at September 30.

But people close to the situation last night said that little progress had been made in negotiations with Hull City Council, Kingston’s main shareholder.

The council, which owns 31 per cent of what is in effect the local incumbent, does not want to be seen to be selling Kingston too cheaply, these people said.

Deutsche Bank is advising Hull City Council, JPMorgan Cazenove is advising Kingston and Carlyle is advised by Rothschild.

“The three investment banks are still talking but there is a gulf to bridge on price,” a person close to the situation said.

It was widely believed at the time the approach was confirmed that the council was ready to sell in order to avoid losing out on central government funding. Local politicians feared that Westminster might want dividend payments that the council gets from Kingston to be considered as part of its overall annual budget allocation.

Kingston last night said that talks had not ended: “The discussions are conceptual in nature and there can be no certainty they will lead to any definitive agreement concerning any transaction.”

Other sources said talks could be reinvigorated if there was any sign that the gap in valuations could be narrowed.

The market has remained sceptical about a deal, with Kingston’s shares trading consistently below the 85p level at which Carlyle is thought to be willing to do business. Kingston shares closed last night at 69¼p.

Carlyle’s interest in Kingston became public at a very early stage, a fact that might have reduced both sides’ negotiating powers.

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