Have we got Phones4u? Yes – for £700m
Saturday 19 March 2011
The private equity firm BC Partners has acquired Phones4u in a deal worth up to £700m, following a protracted sale process that was pulled before Christmas.
The mobile phone retailer's owner, Providence Equity Partners, had initially wanted more than £700m, but was unable to agree on a price late last year after BC Partners knocked £50m off its offer over concerns that the debt markets would take a turn for the worst.
But BC Partners, a pan-European buyout firm, recently revived its interest, and has now bought Phones4u from its rival in a deal believed to be worth just under £700m.
BC Partners has launched a £430m bond offering to fund the deal, while a much smaller chunk of the financing will come from part of a revolving credit facility.
The private equity firm was particularly attracted to Phones4u's lucrative mobile phone insurance business, which now accounts for a hefty chunk of its annual profits.
The retailer, which was founded by the brothers John and Brian Caudwell in 1987, has a network of more than 500 UK stores. It claims to sell one in four new contract smartphones on the high street, and has a particularly strong presence in the youth market. It also sells phones through its telesales and online operation.
Alongside the investment group Doughty Hanson, Providence bought Phones4u for £1.46bn in 2006 from John Caudwell. Doughty then bought the retailer's 20:20 distribution arm for £347m.
Mr Caudwell, who netted £1.2bn in the 2006 acquisition, will receive a further multimillion windfall from the latest deal, but once it is completed the billionaire's association with Phones4u will end. He currently owns the lion's share of the 25 per cent shareholding held by Phones4u's management, with Providence holding 75 per cent.
Andrew Newington, the managing partner at BC Partners, said: "Withits market-leading position, strongand trusted brand, multi-format strategy, and extensive store network, Phones4u is ideally positioned tobenefit from further strong growth in the smartphone market, as technological innovation and product evolution continues."
BC Partners is supporting Phones4u's management team, including Tim Whiting, the chief executive, and plans to open more stores in the UK.
The retailer grew earnings before interest, tax, depreciation and amortisation by 20 per cent to £130m for the year to 31 December 2010. Its turnover rose by by 15.3 per cent to £888m over the period.
BC Partners, which has investments in the gym chain Fitness First and the upmarket estate agency Foxtons, said it expects to complete the deal next month, subject to regulatory approval.
The private equity firm was advised by Goldman Sachs and Global Leisure Partners on the Phones4u deal.
While Fitness First has been a strong growth story for BC Partners, the firm's £370m acquisition of Foxtons around the top of the property market in May 2007 had a troubled start that saw it breach banking covenants in 2008.
The estate agency's performance is thought to have improved since then.
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