Private equity group to buy Telent, the services and support part of the Marconi that Ericsson left behind, in $647M deal

May 25, 2006

3 Min Read
Firm Nabs Marconi's Telent

telent plc (London: TLNT), the former services and support business of Marconi, is set to be acquired by a private equity firm Holmar for £346 million (US$647 million), it announced this morning. (See Telent Outlines Offer.)

Telent is the network services company left behind after Ericsson AB (Nasdaq: ERIC) acquired Marconi's equipment and international businesses in October 2005. It provides services in the U.K. and Germany to carriers ("Telco Services") and to enterprises, utilities, and government bodies ("Enterprise Services"). (See Ericsson Buys Bulk of Marconi and Ericsson/Marconi: The Fallout.)

Holmar is a company set up by Fortress Investment Group LLC specifically for the acquisition. Telent has accepted Holmar's offer of 529.5 pence ($9.91) per share, a 13 percent premium on Wednesday's closing price of 467.5 pence ($8.74), but a formal offer will not be made until Telent receives confirmation from "a small number of significant customers that existing contractual arrangements will continue unaffected by the proposed change of control," the company said.

Telent expects to get these confirmations in the next two to three weeks. Its main customers include BT Group plc (NYSE: BT; London: BTA), Cable and Wireless plc (NYSE: CWP), ntl group ltd. (Nasdaq: NTLI), and Ericsson AB (Nasdaq: ERIC), which, following the hardware acquisition, uses Telent as its preferred U.K. services partner. Telent is also confident of landing an infrastructure development deal for the 2012 Olympic Games, to be held in the U.K.

The news sent Telent's stock up by 46.5 pence, nearly 10 percent, to 514 pence ($9.61) this morning on the London Stock Exchange .

It also shows the pace of change in the telecom sector. In April of last year, Marconi was expected to play a leading role in BT's next-generation network plans. Then BT dropped its 21CN bombshell, and little more than a year later what was once Britain's leading telecom systems company has been broken down and snapped up by a resurgent Swedish vendor and a New York-based private equity group.

News of the Fortress bid came as Telent announced annual revenues for the fiscal year 2006 ending March 31 of £312 million ($584 million), with BT accounting for 48 percent of those revenues. (See Telent Reports Full Year.)

That compares with revenues of £331 million ($620 million) in fiscal 2005, when BT accounted for 60 percent of revenues.

That dip in BT sales will come as no surprise: The breakup of Marconi followed BT's decision not to award a 21CN preferred vendor contract to the British vendor, a decision that crushed the company's valuation. (See Criston, Total Network Solutions Team Up and Marconi in Turmoil.)

Telent's 2006 profits from continued operations totaled £31 million ($58 million), up from 2005's paltry £3 million ($5.6 million). But the company recorded a group net profit of £771 million ($1.44 billion) once net proceeds from the sale to Ericsson are included.

And Telent's management is bullish about the coming year, saying that RFP and order book activity is strong, with 75 percent of its expected 2007 fiscal year revenues set to come from deals already signed.

— Ray Le Maistre, International News Editor, Light Reading

Subscribe and receive the latest news from the industry.
Join 62,000+ members. Yes it's completely free.

You May Also Like