Saudi Arabia backs KKR’s €15 billion bid for Vodafone towers
People familiar with the matter, Saudi Arabia’s sovereign wealth fund is helping to fund what is expected to be the winning bid for a stake in Vodafone €14.8 billion towers business led by private equity firms KKR and Global Infrastructure Partners. The consortium, which includes Saudi Arabia’s Public Investment Fund, is on track to acquire one of Europe’s largest tower businesses, beating out competition from Spain’s Cellnex.
Vodafone has been looking to sell a stake in its masts business for several months after spinning it out earlier this year. The company operates 83,000 towers in ten European countries, including the United Kingdom. Vodafone currently owns 82% of the company. Gulf sovereign wealth funds have been active in global markets as the oil-rich region benefits from high energy prices. The agreement would expose Saudi Arabia to critical European communications infrastructure. It demonstrates how, as interest rates rise and acquisitions become more difficult to finance, dealmakers are forming consortiums and bringing in deep-pocketed Gulf investors willing to write large equity cheques.
The telecoms group’s CEO, Nick Read, initially stated that he was pursuing an industrial merger with either Germany’s Deutsche Telekom or France’s Orange, but has since reversed course. People briefed on the company’s thinking, instead focused on striking a deal with financial partners that would allow him to quickly monetize the Frankfurt-listed Vantage Towers stake while still leaving the door open for an industrial merger in the future. KKR and GIP will invest more than Saudi Arabia’s PIF in the transaction. It is expected to be announced this week, but it could still fall through, according to the sources. Over the past year, Vodafone has come under fire after it was revealed that Cevian, Europe’s largest activist investor, had built an undisclosed position and was seeking a significant shake-up of the sprawling international business, including the sale of underperforming units.
Cevian slashed the vast majority of its stake in the spring after deciding that the economic environment and higher interest rates on the horizon made a turnaround in Vodafone’s fortunes unlikely. Xavier Niel, the French telecoms billionaire, has maintained pressure on the company after his investment vehicle, Atlas Investissement, built a 2.5 percent stake this year and said it was looking for a shake-up. Several Vodafone investors have been waiting for a deal for Vantage Towers to close because it would free up billions of dollars to help reduce the parent company’s debt burden. People familiar with the process said that Blackstone and Brookfield had both considered bids for the tower’s business at an earlier stage. A request for comment from Vodafone was not returned. GIP and KKR both declined to comment.