TDC Owners Seek Up To $4 Billion in Sale, Buyback

TDC A/S, Denmark’s biggest phone company, said its private-equity-firm owners will raise as much as 22.5 billion kroner ($4 billion) in a stock sale and buyback.

TDC’s owners Apax Partners LLP, Blackstone Group LP, KKR & Co., Permira Advisers LLP and Providence Equity Partners Inc. will sell 210 million shares and another 31.5 million in an over-allotment option given sufficient demand, the Copenhagen- based company said in a statement today. The shares are being offered for 47 kroner to 56 kroner each. TDC will also buy back as much as 9 billion kroner of stock from all shareholders.

The private equity firms are selling a stake as investors seek dividend yields from European telecommunications stocks after years of rapid growth and overseas acquisitions. Chief Executive Officer Henrik Poulsen has promised to return 80 percent to 85 percent of free cash flow to investors in dividends. Copenhagen-based TDC plans to pay a dividend of 4.35 kroner a share in 2011.

TDC’s private-equity owners “will want to maintain a significant interest to show to investors that they are not selling out at the peak,” said Andrew Hogley, a London-based analyst at Execution holdings Ltd. “They have to keep some skin in the game.”

The five buyout firms, which hold 88 percent of TDC, will retain as much as 60 percent after the share sale and buyback, Poulsen said in a conference call today. The private-equity firms acquired the stake in TDC for $15.3 billion, including net debt, in 2006.

Ebitda Margin

The Danish phone operator has sold units outside Scandinavia and cut costs to boost earnings before interest, taxes, depreciation and amortization.

TDC has increased its Ebitda margin to 41 percent from 28 percent in the past five years, Poulsen said two weeks ago. The company’s Ebitda margin will probably continue to grow to 41.7 percent in 2011 and 41.9 percent in 2012, according to analysts at SEB AB, one of the share sale managers.

TDC rose 0.1 kroner, or 0.2 percent, to 53.65 kroner in Copenhagen trading, valuing the company at 53.2 billion kroner.

TDC decided to buy back shares and increase shareholder value because the company is “overcapitalized” after its 3.3 billion Swiss francs sale of Sunrise Communications AG, it said in a statement.

JPMorgan Chase & Co., Morgan Stanley and SEB are managing the sale as global coordinators while Deutsche Bank AG and UBS AG are also bookrunners.

Returning Cash

Private equity firms are selling assets again to return cash to investors after deal-making had been brought to a near- halt for two years during the financial crisis. The firms are resuming investments, having led $205 billion of takeovers this year, more than double the amount in the same period last year, according to data compiled by Bloomberg.

Separately, London-based Apax is close to buying Advantage Sales & Marketing Inc. from private-equity firm J.W. Childs Associates LP and Bank of America Corp. for $1.8 billion, according to a person familiar with the deal. Advantage’s current owners will reap a threefold profit from the sale, said the person, who declined to be identified because the talks are private.

--With assistance from Christian Wienberg in Copenhagen, Diana ben-Aaron in Helsinki and Anne-Sylvaine Chassany in Paris. Editors: Robert Valpuesta, Simon Thiel.