Hedge funds and Private Equity - PES

EUR 5.1 billion private equity fund. The investors in the fund are mostly pension funds and other
institutional investors based primarily in Europe and the United States. The Permira Funds have
since their inception had a strong focus on telecoms and technology investing over 30% of all
investments in this sector.
Providence is a global private investment firm specializing in equity investments in media, communications
and information companies around the world. The principals of Providence Equity
manage funds with over USD 9.0 billion in equity commitments, including Providence Equity
Partners V, a USD 4.25 billion private equity fund, and have invested in more than 80 companies
operating in over 20 countries since the firm’s inception in 1990.
2.2 Debt structure, alteration of company capital management
fees requested by LBO
TDC’s purchase, for just under EUR 12bn, at the time the largest LBO ever seen in Europe,
was based on slightly more than 80% leverage (just over EUR 9bn) and 20% equity from the
five purchasers. Capital management fees are still unclear at this stage but will be in the tens of
million of euros area.
According to the prospect of the LBO the cost for legal and financial advisers will be 524 mill €.
Probably some part of the fees will go to the 5 equity funds and the managing partners in the
funds.
2.3 Effects on job creation, investment in training
and education of labour force, investment in innovation.
Already before the LBO, the TDC have stated a planned reduction of the workforce. This plan
will be carried on, and it seemed that the new management will speed up the plan.
It seemed, that the TDC will now stop investment in minority interests in foreign mobile telephone
companies, and will sell the actual portfolio of minority interests I different European mobile
telephone companies.
2.4 Protection of minority shareholders
In contrast to many other equity operations, the Nordic Telephone Company has failed to delist
TDC. This is due, in large part, to the activism of the pension fund that retains minority shares
in the company. The Dansk Metal trade union has been instrumental in this effort, in order to retain
corporate transparency, which would be lost were the company de-listed. The Danish courts
have confirmed the status quo. Currently the new owners hold 88.2% of the stock, falling just
below the required 90% threshold to take full control.
Now the new owners, who control the TDC via 2 holding companies in Denmark and 2 in
Luxembourg, try to reach the 90% ownership mark by increasing the share capital in TDC with
new shares issued to the members of the management board.
Annex – 21 Case studies
229