Saudi Arabia’s sovereign wealth fund is helping bankroll what is set to be the winning bid for a stake in Vodafone’s €14.8bn towers business led by private equity groups KKR and Global Infrastructure Partners, according to people familiar with the matter.
The consortium, which features Saudi Arabia’s Public Investment Fund, is on course to buy into one of the largest tower businesses in Europe, beating competition from Spain’s Cellnex, the people said.
Vodafone has been seeking to sell a stake in its masts business for many months after spinning out the unit early last year. The company operates 83,000 towers across 10 European countries, including the UK. Vodafone currently owns 82 per cent of the operation.
Sovereign wealth funds from the Gulf have been active across global markets as the oil-rich region enjoys a boom from high energy prices. The deal would give Saudi Arabia exposure to critical European communications infrastructure.
It is a sign of how, as rising interest rates make acquisitions more difficult to finance, dealmakers are forming consortiums and bringing in deep-pocketed Gulf investors able to write large equity cheques.
The telecoms group’s chief executive, Nick Read, initially said he was pursuing an industrial merger with either Germany’s Deutsche Telekom or France’s Orange but reversed course in the past few months.
Read turned his attention instead to doing a deal with financial partners that would enable him to monetise the Frankfurt-listed Vantage Towers stake fast, while still leaving open the door for an industrial merger in the future, according to people briefed on the company’s thinking.
KKR and GIP are set to invest more than Saudi Arabia’s PIF in the deal, the people said. It is expected to be announced this week but could yet fall through, they added.
Vodafone has been under pressure over the past year after it emerged that Cevian, Europe’s largest activist investor, had built an undisclosed position and was angling for a significant shake-up of the sprawling international business, including the sale of poorly performing units.
Cevian slashed the vast majority of its stake in the spring when it decided that the economic environment and higher interest rates on the horizon made a turnround in Vodafone’s fortunes unlikely, according to people briefed on the move.
French telecoms billionaire Xavier Niel has, however, maintained pressure on the company after his investment vehicle, Atlas Investissement, built a 2.5 per cent stake this year and said it was angling for a shake-up.
Several Vodafone investors have been eager to see a deal for Vantage Towers materialise, given that it would release billions in capital to help reduce the parent company’s debt burden.
Blackstone and Brookfield had both considered bids for the towers business at an earlier stage but those did not progress, people with knowledge of the process said.
Vodafone did not respond to a request for comment. KKR and GIP declined to comment.
Additional reporting by Andrew England and Samer Al-Atrush