RE: BT lands on KKR’s radar28 Aug 2020 19:33
BT’s £10.7bn market capitalisation puts it within the reach of some larger buyout groups, though analysts have previously said any offer would probably need to be worth more than £15bn based on other deals in the telecoms sector.
KKR and BT declined to comment.
However, there would several substantial obstacles to any deal. BT, which also has £18bn of debt, has the UK’s largest company pension scheme, with more than £50bn of liabilities. It has kicked off a new valuation of its pension scheme that will not be complete until next year, with analysts predicting a deficit of between £8bn and £9bn. Any sale of the company or any of its assets would also require consultation with the company’s pension trustees.
The government could veto any potential deal to take BT private given the company controls the largest broadband network in the country, deemed to be critical national infrastructure, as well as the EE mobile phone network. BT, via Openreach, is also finalising its strategy to invest £12bn in upgrading its fibre optic network to cover 20m homes.
Delivering gigabit speed broadband to the entire country is a key policy of the Boris Johnson government although any potential buyer could pledge to bankroll the fibre upgrade outside the glare of the public markets.
European telecoms companies, which trade at depressed valuations compared with US peers, have long been seen as potential targets for infrastructure funds and private equity although deals have tended to be limited to assets like masts or smaller players looking for investment.
KKR is one of a handful of mostly US-based private equity groups that have struck a large number of deals during the pandemic. Its co-president and co-chief operating officer Joe Bae said in June that it was intentionally “capitalising on the unprecedented level of volatility and dislocation” to strike deals at “attractive prices”
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