Around the world, privatization remains all the rage.
Um, did I say "privatization is all the rage?" My mistake. I think I meant to say "going private is all the rage." Because that's just what's about to happen with one of the heroines of my story from earlier this week: Danish telecom company TDC (NYSE:TLD).
When we left off on this story back on Monday, TDC was one of two potential acquisition targets for a (maybe) soon-to-be-privatized Swisscom (NYSE:SCM). Swisscom, of which the Swiss government still owns a whopping 62.7% stake, was reportedly interested in buying its nearby rival, TDC, and was hoping the young lass would remain "on the market" until Swisscom could get an annulment of its marriage to its federal ball and chain.
Down low, too slow
So much for that idea. Yesterday, CBS MarketWatch reported that a wide-ranging coalition of private equity firms, running from the well-known Apax, Kohlberg Kravis Roberts, and Blackstone, to lesser-known firms like Permira Advisers and Providence Equity, has bid $12 billion to take TDC private in Europe's largest-ever leveraged buyout (LBO). The bid, if ultimately successful, would also be the world's largest LBO since the one involving RJR Nabisco (since split up and resold to form part of public companies Reynolds American (NYSE:RAI) andMotley Fool Income Investor pick Kraft (NYSE:KFT) -- and by extension, Kraft parent company Altria (NYSE:MO)), which was described in the 1990 bestseller Barbarians at the Gate.
According to TDC's board, the private equity coalition's offer is, on its face, already a good enough deal to recommend, and the board has lent its stamp of approval. However, after seeing the beneficial effects of a good bidding war in recent months -- the interminable battle for MCI (NASDAQ:MCIP) or the more recent bidding skirmish over Canada's Dofasco for another -- you can hardly blame them for expressing optimism that this first offer will spur other bidders to up the ante and keeping the bidding open.
Analysts interviewed by MarketWatch expressed doubts that any such rival bidder will appear, however. Swisscom itself seems stymied by Denmark's unwillingness to sell its primary telecom to a bidder controlled by another sovereign. On the other hand, at the other end of the LBO process, it's still possible that Swisscom will get its wish.
By all accounts, ridding itself of its state owners will be a controversial and time-consuming process. Laws need to be changed, referenda held, voters swayed. In short, it could take months to finish. Meanwhile, the private equity firms can be restructuring and improving TDC's profitability, selling off bits and pieces. Who knows? The next time TDC goes on the auction block, Swisscom just might be in a position to get its wish.
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Fool contributor Rich Smith owns no shares in any of the companies mentioned in this article.
