Niel Cements Control Over Iliad With $1.5 Billion Buyback
Iliad Plans $1.5 Billion Buyback Guaranteed by Billionaire Niel
(Bloomberg) --
Billionaire Xavier Niel will finance a 1.4 billion-euro ($1.5 billion) share buyback at Iliad SA, bolstering his control over the French phone carrier he founded. The shares rose as much as 20%, the most since Iliad’s 2004 stock-market debut.
The company plans to repurchase 11.7 million shares -- 20% of its share capital -- at a price of 120 euros apiece, representing a 26% premium to Iliad’s closing price on Monday. The offering will be funded by a stock issuance guaranteed by Niel, who doesn’t plan to tender any of his shares. In another investor-friendly move, Iliad said it will also boost its dividend by almost three times.
Depending on investor uptake, Niel’s stake in the company could rise from just over 52% to as much as 72%, Chief Executive Officer Thomas Reynaud said on a call with journalists. The buyback is in response to investor interest and shows shows Niel’s confidence in Iliad’s strategy, Reynaud said.
“This move is a way for Niel to cement his influence at Iliad even further,” Alexandre Iatrides, an analyst at Oddo BHF, said by phone. “He’s probably thinking he’s getting a good deal and he’s offering an honorable exit strategy for the investors who want out.”
Iliad, which took the French market by storm with its low-cost offerings, had been losing subscribers in France in the past year-and-a-half as competition intensifies, just as it tries to shake up the Italian market.
Even with the premium, the buyback price is nowhere near Iliad’s historic highs. The company’s shares hit 238.70 euros in June 2014 and traded as high as 129 euros almost a year ago. The offer puts Iliad’s enterprise value at 6.7 times its earnings before interest, taxes, depreciation and amortization -- a premium to its peers, according to Thomas Coudry, an analyst at Bryan, Garnier & Co.
The shares were up 17.7% at 111.85 euros as of 12:44 p.m. in Paris.
Iliad announced the offering as it reported third-quarter results that demonstrated better-than-expected improvements in its French and Italian units.
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The carrier gained 32,000 net new broadband subscribers in France, helped by its fiber offering. Iliad’s total subscribers of 19.72 million at the end of the period in France was above analysts’ estimates for about 19.68 million, according to a company-compiled consensus. In Italy, it had 4.54 million mobile subscribers, compared with an estimate of 4.36 million.
Revenue of 1.34 billion euros was slightly ahead of the average analyst estimate for 1.33 billion euros.
Iliad will increase the annual dividend to 2.60 euros a share, up from 90 euro cents. The 2.9 times boost represents a total of 150 million euros, the company said.
“We are surprised by the dividend policy given the heavy investment needed at the group level, but this might be understood in the light of Xavier Niel’s future accretion, and should also help minority shareholders subscribe to the capital increase,” Coudry wrote in a note on Tuesday.
Niel doesn’t plan to take the company private, according to a company presentation. He would have no obligation to make a full takeover offer were his holding to reach 72% because he already owns more than 30%, said Brice Paris, Iliad’s head of investor relations.
To contact the reporter on this story: Angelina Rascouet in Paris at arascouet1@bloomberg.net
To contact the editors responsible for this story: Rebecca Penty at rpenty@bloomberg.net, Jennifer Ryan
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