Hedge funds and Private Equity - PES

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2.5 Management policies and shareholder activism:
stock option programs, effects on Board and CEOs,
management fees, employee information
The TDC management and board, which had espoused the sound financial position of the
company before the takeover, have seen significant personal returns on their holdings in the
company while TDC has seen debt, interest rates and risk exposure rocket and investment capacity
crumble. Following the takeover, TDC’s new owners were awarded an immediate cash dividend
four times annual earnings already paid. The April 2006 dividend was worth some EUR
5.9bn to the new owners.
2.6 Effects on public finances
Once again, the actual effect on public finances of the purchase is, as yet, unclear. One conservative
estimate, however, suggests that the Danish government will lose some EUR 270m in
tax revenue.
Because of joint taxation of the two Danish holding companies and the TDC- companies the interest
of the loans for the LBO are now deducted in the taxable income of TDC, and it is expected,
that the TDC will from 2006 and forward not pay company tax to the Danish state.
2.7 Pension fund
The TDC- which originally was 3 local telephone companies owned by the Danish state and
local municipalities – has its own pension funds for the employees funded by the telephone company.
The TDC now try to persuade the government to allowed that ½ bn € of “surplus capital”
in the pensions funds are contributed to the TDC.