Billionaire Petr Kellner’s PPF Group is poised to acquire a controlling stake in the largest Czech telecoms group from Spain’s Telefónica in a deal valued at about €2.5bn. The deal could be finalised as early as Monday, according to two people familiar with the details, with an announcement expected early this week. PPF is then expected to launch a tender offer for the remaining 31 per cent listed on the Czech stock exchange, potentially adding €1bn to the enterprise value of the deal to take the group private.
Telefónica has been in talks to sell its operations in the Czech Republic for the past two months, although it has been speaking exclusively with PPF for several weeks. PPF is a Czech investment group founded by Mr Kellner, an entrepreneur who remains the majority shareholder. It invests in a broad range of sectors from retail banking to agriculture across central and eastern Europe. Even so, the deal is a significant investment for a group with assets valued at about €22bn. Telefónica has owned the 66 per cent stake in the Czech Republic’s biggest telephone group since acquiring control of Cesky Telecom eight years ago from the government. However, the group has been selling non-core assets as it looks to bolster a balance sheet carrying heavy debts, in part to allow flexibility to invest when opportunities arise in its core southern European and Latin American markets. Telefónica is in the process of selling its Irish business to Hutchison Whampoa, and has sold other operations such as its call-centre business. Meanwhile, Telefónica has increased its stake in the controlling shareholder group in Telecom Italia, and has been linked with a potential move on its rival Italian group’s Brazilian business. It is also finalising a deal to buy KPN’s German business to merge with its own. The Czech sale, at an enterprise value of €2.5bn, reflects a multiple of about six times earnings before interest, taxes, depreciation and amortisation, broadly in line with sector average. Telefónica had confirmed that it was exploring strategic options in the Czech Republic. Other groups in the country were expected to be prevented from bidding by local competition law, which has made PPF the most likely buyer. Telefónica Czech Republic has suffered as rivals such as Vodafone have become more aggressive, while the government appears keen to introduce competition to the market. PPF previously owned a telecoms business, and considered participating in an aborted auction of 4G spectrum, but sold out of the operation given the difficulties of merging with other groups in the country. Telefónica and PPF declined to comment.