Klesch buys Dynegy’s European unit

UK distressed specialist Klesch has bought Dynegy’s entire European broadband unit as the struggling US telecoms company exits the European market.

(PrivateEquityCentral.net) London-based restructuring specialist Klesch & Co has acquired the European communications business of energy delivery and power generation company Dynegy.


The division Klesch is acquiring consists of Dynegy’s entire European broadband network, which is accessible in 32 cities in Western Europe. Dynegy gained control of the market when it acquired London-based iaxis Ltd for less than $200m. Dynegy sold the division as part of its plan to exit the communications business entirely and focus on its core strategy of power production and energy distribution. Dynegy’s stock price has fallen from nearly $20 in April 2002 to its current level of $2.14.


Dynegy expects a slight gain in the first quarter of 2003 related to the sale. Terms of the deal were not disclosed.


“We believe that the European telecommunications arena may be bottoming out,” said Gary Klesch, chairman of Klesch & Company. “Going forward, the sector has the potential to create value for those who are able to restructure to meet current demand.”


“This is a strong first step in Dynegy’s strategic commitment to divest its investment in communications and focus on our core energy businesses,” Bruce Williamson, president and chief executive officer of Dynegy, added. “The final phase of this commitment is the exit from the US portion of our communications business.” The company expects to exit its US communications business early this year.


In February 2001, Klesch teamed with Liberty Media to buy the remaining broadband cable assets of Deutsche Telekom in Germany. Terms of that deal were not disclosed, but market estimates of the value of the assets range between $2.5bn and $2.75bn.


Klesch & Co is currently raising a fund to focus on distressed opportunities in Europe, which Gary Klesch estimates to be a $150bn market. The firm was founded in 1999.