Blue chip LBO firms go after Cesky

A number of private equity firms are today entering into a bidding contest over control of the Czech network operator Cesky Telecom.

A combined 78 per cent stake in the operator is for sale. The Czech Government has set an evening deadline for initial offers for its 51 per cent stake, which is valued at around E2.73bn, and for the 27 per cent jointly owned by Dutch operator KPN Telecom and SwissCom.

Private equity firms in the running include Apax Partners, CVC Capital Partners, Doughty Hanson, Providence Capital and Spectrum Equity Partners. A group of Czech investors is also expected to participate.

Other strategic buyers could express an interest, but financial bidders are expected to take the lead as telecom companies make an attractive target for private equity firms on two counts. Firstly they are renowned for generating cash and secondly those that are government-owned are likely to offer room for operational improvements before they are sold on.

A recent example of financial buyers investing in the telecoms sector was the sale of the Irish telecommunications group Eircom to Valentia, the consortium headed by media magnate Tony O'Reilly and including George Soros. The group paid E3bn for the business in what was the first fixed-line telecom-related buyout.

The Czech Government hopes to sell its stake in Cesky no later than by May, but has made it clear that it will not settle at any price. It also remains unclear how the government will respond to bidders that have not struck a partnership with a telecom – a stipulation it made at the time of the sale announcement.