Sweden’s Tele2 today announced that it has agreed to acquire TDC Sweden at an enterprise value of SEK2.9 billion (USD352 million) to strengthen its position in the business-to-business (B2B) market segment. Danish-owned TDC Sweden is well established in serving both the public sector and many Swedish blue chip customers with end-to-end connectivity and communication solutions, whilst it has a solid track record of profitable growth, delivering net sales in 2015 of SEK3.4 billion and an EBITDA of SEK400 million. The target company had 809 full time employees at the end of 2015. The transaction is subject to regulatory approval by the relevant competition authorities, and is expected to close by the fourth quarter of 2016.
TDC separately announced that the sale of its TDC Sweden division would generate a capital gain of around DKK800 million (USD122 million). The sale was the result of the Danish group’s strategic review of its Swedish operations carried out in the first quarter of this year.
Tele2’s press release says that the combined TDC Sweden and Tele2 will be a stronger challenger, offering a more comprehensive product portfolio to Swedish business customers, well positioned to capture growth trends in the industry such as from data growth, managed services and migration to cloud platforms. Allison Kirkby, CEO of the Tele2 group, commented: ‘The acquisition of TDC Sweden is consistent with our strategy to be champions of customer value for both consumers and businesses. This deal is a unique opportunity for Tele2 to build scale and expand its range of services in the B2B market, it is hugely complementary to our existing Swedish business, and it allows us to meet the global trend of large B2B customers demanding a wider range of communication and network services. For our shareholders, the combination of Tele2 and TDC Sweden unlocks significant value creation from synergies.’ Samuel Skott, CEO of Tele2 Sweden, added that Tele2 has traditionally been strong in mobile telephony and fixed telephony while TDC Sweden is ‘further ahead in network-as-a-service, unified communications and hardware.’
Tele2 estimates annualised run rate OPEX and CAPEX synergies from the deal to amount to approximately SEK300 million, with additional one-off CAPEX synergies estimated at SEK200 million. Positive effects of cross-selling are also expected. Preliminary estimates for the integration costs and other one-off costs required to achieve synergies amount to approximately SEK750 million.
In conjunction with the TDC Sweden takeover, Tele2 proposes to undertake an equity issue with preferential rights to existing shareholders to a total amount of approximately SEK3 billion by Q4 2016, subject to shareholder approval. It adds, however, that the takeover deal is not conditional on equity financing as Tele2 has available funds and existing credit facilities in place.