O2 CEO weighs leveraged MBO following collapse of CK Hutchison deal
The Chief Executive of O2, Ronan Dunne, is considering launching an GBP 8.5bn (USD 12.2bn) management buyout of the cash-generative UK-based mobile phone group after regulators blocked a takeover by CK Hutchison, The Daily Telegraph reported. Private-equity firms have approached Dunne during the past few weeks offering to back a leveraged buyout and O2 executives are currently looking at whether an MBO headed by Dunne would be feasible, the report said, citing unspecified sources.
The interested PE firms and their investment-bank advisers have valued a leveraged buyout of O2 at GBP 8.5bn, the report said. It noted that Hong Kong-based Hutchison was prepared to pay GBP 10.25bn but would have benefited from synergies between O2 and its own Three subsidiary in the UK.
One group interested in a leveraged buyout of O2 includes CVC Capital Partners and Apax and is headed by former Orange UK chief executive Tom Alexander, the item reported. Sources said Dunne is prepared to examine buyout proposals whether Alexander, a close associate, is involved or not.
O2’s parent, Spain-based Telefonica, is believed not to be participating in the early-stage discussions taking place, the report said. It noted that Telefonica has stated O2 might be floated, adding that the funds which were set to finance Hutchison’s failed deal are reportedly being lined up as cornerstone investors. They are likely to be interested, according to an unnamed person quoted in the report, but Telefonica is currently prevented from talking to them as an exclusivity agreement does not expire until 15 July, the item stated.
The cable broadcaster Sky is believed to be interested in making an investment in O2 but has ruled out making a takeover offer, the item reported. A person familiar with the thinking at Sky said any use of capital would have to be “smarter” than just paying out GBP 9bn, the report stated.
Daily Telegraph