Czech government selects successful Cesky consortium

Following protracted negotiations over the sale of the Czech telecoms operator, the Czech government has finally agreed to a E1.82bn bid for Cesky Telecom.

The Czech government has accepted a E1.82bn bid from a consortium comprising Deutsche Bank and TDC of Denmark for the state-owned telecoms operator Cesky Telecom.

The announcement brings to an end the long-running saga over who would complete what is one of the largest private equity deals completed in Europe this year and Central Europe’s largest ever LBO transaction.

The Deutsche Bank consortium, led by the investment bank’s telecoms division, has agreed to pay E1.82bn for the 51 per cent stake, which is markedly below the government’s original target of E2.5bn, but is above some analysts’ estimation that the price could be as low as E1.6bn.

Danish telecoms group TDC is expected to sell its 25 per cent stake in Czech holding company Bivideon (controller of the number two Czech telecoms operator) to Deutsche Bank as part of its plan to participate in the acquisition of the majority stake. However TDC is primarily involved in the acquisition of Cesky from a management perspective.

In April, Czech finance minister Jiri Rusnok confirmed that the auction process had been cut to between just two consortia, the Deutsche Bank group and a group led by CVC Capital Partners. The sale was then put on hold until after the Czech general elections which saw the election of a new government. Negotiations have stop-started over recent months, the result of new appointments to the government and disagreements over price.

The protracted and at times contradictory nature of the sale seems to have disheartened some bidders. The Blackstone Group, one of Deutsche Bank’s backers for the winning bid, pulled out of the consortium last month.

The financing package for the acquisition has not yet been announced. The sale is expected to complete by the end of 2002.