Billionaire Xavier Niel has made a €3.1 billion (US$3.7 billion) offer to buy the remaining shares in France-based Iliad and take it private, signaling his intention of turning the group into a "leading telecommunications player in Europe."

The offer is set at €182 per share, which Niel said represents a premium of 61% on the closing share price at July 29, 2021.

As things stand, Niel currently owns 70.63% of Iliad's share capital and 78.67% of the voting rights. Iliad's managers and long-standing shareholders own 4.31% of the share capital and 4.92% of the voting rights.

Figure 1: Private lives: Billionaire Xavier Niel already owns over 70% of Iliad stock – the new offer would make that a round 100%.
(Source: Le Web on Flickr CC2.0)

Reuters noted that Niel's offer gives the whole 100% of Iliad an equity market capitalization of about €10.7 billion ($12.7 billion).

Niel said: "I founded Iliad in 1999 and I'm very proud of what the group has grown into and the value it has created for all of its shareholders. Iliad is now entering a new phase in its development, requiring rapid changes and major investments which will be easier to undertake as an unlisted company. Our ambition for Iliad is to accelerate its growth to make it a leading telecommunications player in Europe."

The move came as Iliad announced its results for the first six months of 2021. The group said revenue increased by 33.7% to €33.7 billion ($40 billion), driven by the inclusion of recent acquisition Play in Poland. Revenue in France increased 2.7% to €2.54 billion ($2.78 billion), while in Italy sales were up 22.9% at €383 million ($455 million).

In Poland, pro forma growth of 3.9% to €801 million ($952 million) was reported.

Consolidated EBITDAal also rose strongly by 59.5% to €1.4 billion ($1.66 billion), again driven by Play. Profits increased 15% to €239 million ($284 million).

Iliad said it became Europe's sixth-largest mobile operator by number of subscribers (excluding M2M) following the acquisition of Play in Poland in November 2020.

Disruptive force

It remains to be seen what Niel will focus on once he has taken Iliad private. Notably, the businessman has already built an international telecoms empire using Iliad and his own NJJ investment vehicle.

Indeed, Iliad has come a long way from its roots as a provider of fixed telecoms services in France, becoming a major disruptor on mobile markets in Europe.

For example, it launched Free Mobile in France in 2012, sparking a massive price war and forcing the incumbent providers to launch their own low-cost offerings. Orange introduced Sosh as an alternative low-cost provider, while Altice Europe-owned SFR launched Red by SFR and Bouygues Telecom came up with the B&You brand.

Iliad then took its strategy to other markets in Europe. It launched Iliad Italia in 2018 and again caused a price war that spawned a raft of low-cost offerings from rivals. Telecom Italia (TIM) launched the Kena low-cost brand, Vodafone introduced Ho Mobile (ho.), and WindTre now offers low-cost plans under Very Mobile.

The group's next foray was Poland, where it acquired the mobile operator Play at the beginning of 2020. Play is already a fairly disruptive provider on the mobile market in Poland, where it competes with Orange Poland, Plus and T-Mobile Poland.

Also worth noting is that Iliad acquired 50% of Telecom Reunion Mayotte, which is now jointly controlled by Iliad and the Hiridjee group. The Altice group had committed to divest Outremer Telecom mobile businesses in La Reunion and Mayotte as a condition for regulatory clearance of the acquisition of SFR by Numericable.

The Reunion-based business now operates under the Free brand, while the Mayotte business continues to trade as "Only."

Tip of the iceberg

It gets even more interesting if you look beyond the operators owned by the Iliad group. Niel has secured investments in several other markets after making use of his own investment firm NJJ Group to stage a number of takeovers.

For example, in 2014 NJJ Capital acquired a 55% stake in Monaco Telecom. The Monégasque operator subsequently snapped up MTN Cyprus and Vodafone Malta; both providers now operate under the Epic brand.

Also in 2014, NJJ agreed to buy Orange Switzerland and Orange Liechtenstein from Matterhorn Mobile, a company indirectly owned by private equity firm Apax Partners. The two former Orange businesses now trade as Salt.

In July 2017, NJJ was part of a consortium called Saga Africa Holdings that acquired Tigo Senegal from Luxembourg-based Millicom International Cellular. Tigo was eventually rebranded as Free Senegal in October 2019.

Then in 2018, both NJJ and Iliad were involved in the acquisition of a majority stake in eir of Ireland. NJJ took a 32.9% stake, while Iliad acquired 31.6%. NJJ also has a call option that would enable it to take control of the Irish incumbent in 2024. The remainder of eir is owned by Anchorage Capital Group (26.6%) and Davidson Kempner (8.9%).

Niel vs. Drahi

Niel resembles Patrick Drahi in a number of ways. Both have French roots, although Drahi is also said to have Moroccan, Portuguese and Israeli citizenship.

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They are also billionaires who have acted as highly disruptive players on the telecoms market — Drahi through Altice and Niel through Iliad and NJJ. They also now own shares in former incumbents after Drahi acquired a 12.1% stake in BT.

Furthermore, Drahi has already taken Altice private: He made use of Next Private to buy out minority shareholders of Altice Europe, which was delisted in January 2021.

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— Anne Morris, contributing editor, special to Light Reading