KKR to sell majority stake in European telecom operator

Agreement follows string of deals in Europe’s communications and broadcasting sectors

U.S. private-equity firm KKR & Co. agreed to sell a majority stake in European telecom operator United Group BV to U.K. rival BC Partners LLP, the latest move in a flurry of deal making in the continent’s communications and broadcasting sector.

In a joint statement Thursday, the buyout firms didn’t disclose financial terms or the exact size of the stake. According to people familiar with the matter, the deal valued United Group at 2.60 billion euros ($3.04 billion), including debt.

The deal underscores the pressure telecom and cable companies face to offer a wide array of telecom services as well as sports, entertainment and other content to help boost revenue and fend off new competition. Among the most high-profile deals is Comcast Corp.’s $38.8 billion win over 21st Century Fox Inc. in the bidding war to acquire Britain’sSky PLC. Vodafone Group PLC struck a $23 billion deal earlier this year to buy some European cable operations from John Malone’s Liberty Global PLC to create a continental giant offering packages of cable, internet, wireless and fixed-line service on a single bill.

Fox and News Corp, which owns The Wall Street Journal, share common ownership.

Amsterdam-based United Group serves Southeastern Europe, and describes itself as the largest alternative telecom provider in the countries that comprised the former Yugoslavia. The Journal reported in June the possibility of the company’s sale.

Created in 2007 from the combination of SBB, Telemach Slovenia and Telemach Bosnia, its cable-and satellite telecommunications business offers television, fixed-line and mobile services across Serbia, Bosnia & Herzegovina, Montenegro, and Slovenia. United Group also provides pay-TV and fixed-line telephone services over the internet to the former Yugoslav diaspora.

Its content business includes original content and pay-TV channels offering entertainment, news and sports, according to the company’s website.

KKR acquired the business in 2014 for an undisclosed amount. Since then, its customer base has increased to 3.67 million from 1.89 million. United Group’s network passes through 1.82 million homes. It generated 556.7 million euro in revenue over the past 12 months, according to the company’s website.

KKR’s return on the investment couldn’t be learned, but the firm will retain a minority stake in United Group.

United’s focus on content and connectivity fits with the deal making playing out among some of the larger telecom operators in Europe. Still, the relatively small market of Southeastern Europe helps explain the business’s appeal to buyout firms rather than bigger industry players.

Cinven Partners LLP and Warburg Pincus LLC, two other big buyout firms, competed against BC Partners to acquire United Group.

BC Partners’ interest in United Group follows some successful bets in the communications sector. In 2015, the buyout firm and its partner Canada Pension Plan Investment Board sold a 70% stake in Suddenlink to Altice SA in a deal which valued the U.S. cable company at $9.1 billion. The investment firms continued to hold a minority stake in Altice’s U.S. cable arm. BC Partners more than doubled its investment when Altice USA listed on the New York Stock Exchange two years later. It was the largest U.S. IPO by a telecoms company in 17 years, the Journal reported at the time.

Cash for the United Group deal will come from BC Partners’ 7 billion euro flagship fund, which it raised earlier this year to back companies based in Europe and the U.S. Other investments the fund has made include a majority stake in U.S. software provider NAVEX Global.