April Fools'!

Kimberly Romaine
28 April 2011

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At least two mega-deals may flop. Are CEE vendors luring in private equity under false pretences?

It's the time of year to trick people. On the first day of this month, your correspondent nearly ran a story on the merger of Twitter and music portal Shazam to form Shitter. But alas my colleagues pointed out the date... And on Easter Monday, Polish lads will have delighted in dousing women with water for Smingus Dyngus.

Central and Eastern European vendors are taking the month of pulling stunts a bit too seriously, with two high-profile deals looking likely to let bidders down at the last minute. Firstly, Polkomtel. Management are meeting with potential investors this week, with final bids due on May 6. But it seems as though interested parties are getting poor reception from the Polish government for its prized telco asset; with just five bidders left in the process. These include a consortium of Apax and Bain; another of KKR and Providence. CVC is also believed to be preparing a final bid. The hefty price-tag and onerous ownership structure have seen TPG and Blackstone drop out of the bidding; it is believed the largest bid is above PLN 18bn ($6.3bn).

However a source close to the deal feels the buyout may give way to an expansion deal, with a lot less money forked over in return for a minority stake. This money would tide the business over for 12-18 months, when an IPO is pursued on the Warsaw Stock Exchange.

A similar let-down may be on the books in Turkey, where publisher Doğan Yayin just announced it would double its capital (to $1.3bn) through a rights issue. This not only sent its share price on an 8% slide, but it may also mean that attracting private equity for a sale of its media assets may no longer be necessary. This would leave KKR and TPG high and dry. There had already been speculation that Doğan's interest in a sale was shaky: the bids from interested parties are non-binding, and some have suggested the auction is being run to exhaust options while the owner dukes out a court battle over back taxes and penalties.

Other parties have already dropped out of the Doğan bidding, with 12 initially believe to have been interested, largely owing to pricing concerns. Apax Partners is cited as one such group.