Mid Europa in €202m sale of Hungary-based Invitel to China-CEE Fund

The deal values Invitel at 4.5x the company's 2015 EBITDA, according to a statement by the group's co-owner Magyar Telecom, which held a 49% stake in Invitel before the sale through the Matel Holding vehicle. Ownership will be transferred to the China-CEE Investment Co-operation Fund, an investment vehicle managed by CEE Equity Partners and partially funded by Chinese capital.

Mid Europa's exit comes 14 years after its initial investment in Invitel, ending a long-running relationship with the business, which has seen it bought and sold on multiple occasions. Initially investing through the Mid Europa precursor AIG Emerging Europe Infrastructure Fund, the GP most recently took a majority stake in Invitel in September 2009, acquiring a 64.6% stake in the business from majority owner TDC, the Danish legacy telecoms operator.

Magyar said in a statement its shares are stapled to the senior secured notes financing Invitel, due in June 2018, and that these notes will be redeemed upon completion of the sale. The transaction is subject to approval by competition authorities.

Previous funding
Through the Mid Europa precursor, AIG Emerging Europe Infrastructure Fund (AIG EEIF), the private equity firm first backed Invitel in a €325m EV buyout in May 2003, according to unquote" data. The deal saw AIG EEIF invest alongside GMT Communications Partners in a 50-50 acquisition of what was then Vivendi Telecom Hungary.

In 2006, GMT and Mid Europa raised €118m through a partial sale of what had then become Invitel, reducing their respective stakes from 47.5% to 33.33% by selling back to the company's senior management.

Invitel was refinanced in August 2004, when a €165m senior credit facility was arranged in tandem with the issuance of €142m of senior notes due in 2012. The new financing allowed the company to refinance €260m of senior bank debt and a vendor note held by Vivendi Telecom International, as well as partially repay shareholder loans.

Mid Europa and GMT exited the business to Danish telecoms provider TDC in January 2007, netting €26m apiece in a deal that gave Invitel a €470m EV. TDC bought out the Matel holdco and management as part of the deal, taking a 95.8% stake. According to the Financial Times, GMT and Mid Europa netted 3.9x money on their initial investment.

Mid Europa returned as the sole private equity backer of Invitel in September 2009, tapping its first Mid Europa-branded vehicle, the 2007-vintage €1.5bn Mid Europa Fund III. The fund agreed to acquire a 64.6% stake in the business from TDC, in a deal that valued the company at around €700m including debt, according to the FT. As part of the deal, Mid Europa injected capital to de-leverage Invitel, buying back €85m of senior loans and purchasing the company's €125m worth of outstanding PIK notes at 55 cents on the euro. The GP committed around €200m of equity in the deal for Invitel, which was listed on the New York Stock Exchange at the time.

In July 2010, the GP completed a public tender offer to acquire additional shares in Invitel, bringing its shareholding to 91.8% of the business. The increase came two months after Invitel's disposal of its international wholesale business to Turkey-based telecoms business Türk Telekom in a €221m EV deal, according to unquote" data.

Company
Headquartered in Budapest, Invitel is a provider of fixed-line telecommunications and broadband services to private and corporate customers in Hungary.

The firm claims to serve more than a million homes in Hungary, covering 100 cities in the country. The company achieved EBITDA of around €45m in 2015, on the basis of the deal's €202m EV being 4.5x earnings.

People
Mid Europa Partners – Nikolaus Bethlen (partner).
CEE Equity Partners – Tamas Szalai (investment director).

Advisers
Vendor – Rothschild (corporate finance); Dechert (legal); EY (tax).
Equity – CMS Cameron McKenna (legal); PwC (financial due diligence); Arthur D Little (commercial due diligence); Solon (commercial due diligence).
Debt – White & Case (legal); Dentons (legal); Neocleous (legal).

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• Topics
• Exits
• Consumer
• CEE
• Mid Europa Partners
• Hungary
• CEE
• GMT Communications Partners
• Rothschild
• Dentons
• CMS Cameron McKenna
• PwC
• EY (Ernst & Young)
• Dechert