New from Breakingviews: Iliad’s baffling buyback tests investor credulity, says edwardcropley:
Xavier Niel, founder and majority-owner of French broadband Internet provider Iliad attends the company's 2017 annual results presentation in Paris, France, March 13, 2018.
Niel is not alone in being a disgruntled investor in Iliad, which was worth 5.6 billion euros before Tuesday’s announcement pushed the shares up 18%. The stock has almost halved in the last two years, sunk largely by a price war launched by Niel himself. French rivals Orange, Bouygues and Altice Europe have emerged in far better shape, with the latter up more than three-fold over the same period, helped by its massively leveraged capital structure.
To start with, Iliad will spend 1.4 billion euros to buy back 20% of its shares. What’s unusual is that it is offering to do so at 120 euros per share – a 38% premium to the average price over the previous three months. Niel will not participate in the buyback.
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Iliad’s baffling buyback tests investor credulityXavier Niel’s French telecom group will spend 1.4 bln euros to buy out minority shareholders at a premium. At the same time, the entrepreneur is underwriting a share issue to raise the same amount. It looks a convoluted and costly way for the billionaire to lift his stake.
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