Carlyle Group, KKR Eyeing Optus Satellite

By Mani
Updated on

KKR & Co. L.P. (NYSE:KKR) and Carlyle Group LP (NASDAQ:CG) are among companies lining up bids for Optus Satellite, reports Reuters.

Carlyle Group, KKR Eyeing Optus Satellite

Optus Satellite is the Australian arm of Singapore Telecommunications (SingTel) and occupies the second position behind former monopoly Telstra.

SingTel Valuing Optus

SingTel is reportedly valuing the Optus at over $2 billion. The other potential bidders include Eutelsat Communications SA (EPA:ETL) from France, The Blackstone Group L.P. (NYSE:BX) and Providence Equity Partners.

SingTel has sent out financial information to interested bidders on Monday, with the first deadline for bids set for June 14, according to Reuters.

Optus Satellite provides telecommunications services to over 9 million customers in Australia. The facilities-based carrier uses a combination of fixed-line, wireless and satellite networks to provide various services such as mobile, local access, Internet access, cable television and mobile broadband access.

Optus Satellite has five satellites providing services for broadcasters including the ABC, SBS, Foxtel, Southern Cross and WIN, plus several government departments.

Singapore state investor Temasek Holdings controls South Asia’s largest telecom operator SingTel. Australia accounted for 65 percent of SingTel’s revenue for the last financial year.

The telecom operator is expected to shift the money from the slow growing Singapore and Australian markets into faster-growing businesses. On the other hand, steady cash flow from business coupled with low capital expenditure could be possible attractions for the potential suitors.

This month SingTel reported that operating revenue of Optus was down 5.4 per cent to $2.17 billion, reducing net profit by 6.9 per cent to $249 million.  During March, the telecom operator announced a strategic review of Optus Satellite.

Morgan Stanley (NYSE:MS) and Credit Suisse Group AG (NYSE:CS) are reportedly providing a loan of about A$1.7 billion that buyers can use for the acquisition, according to Reuters. The financing package from Credit Suisse and Morgan Stanley is around seven times Optus’ EBITDA, a leverage level not seen on a buyout in Australia since before the financial crisis.

The move to tap U.S. funding emanates from Australia’s local commercial banks’ reluctance to lend more than around four or five times earnings on any buyout deal.

According to Thomson Reuters LPC, buyout loans from the United States surged to a record $287 billion in the first quarter, thereby signaling investors’ increasing risk appetite.

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