KKR, Canada’s CPPIB join hands for Bharti Infratel stake

A consortium of private equity major KKR and the Canadian Pension Plan Investment Board (CPPIB) have emerged as the sole contender for over a $5-billion controlling stake in Bharti Infratel after rival bidder Brookfield Asset Management ended talks with the company last weekend, reports today said.

Brookfield, which had indicated a higher offer, was given a two-week window to make a definitive offer, which expired on 4 December.

India's largest wireless telephone service provider Bharti Airtel is looking to monetize shares in the publicly traded telecom tower unit to beef up its war chest for a bruising marketplace battle ahead with new entrant Reliance Jio.

KKR and CPPIB have resumed discussions to sew up what promises to be the largest private equity takeover deal in India. But the deal still faces hurdles as the Bharti Infratel management is not favourably inclined to a majority share sale at only a slight premium to prevailing share price, according to The Times of India. The management is exploring other alternatives, including a large block deal on the bourses next year, it said.

KKR and CPPIB would insist on 51-per cent ownership and see little headroom for sweetening the price as recent global developments make the cost of capital dearer. Every Rs5 increase in the price enhances the company's market value by Rs900 crore.

The private equity consortium is said to be lining up financing support from Citigroup, JP Morgan and Bank of America Merrill Lynch depending on the progress in the deal-making. Another private equity giant Blackstone could join KKR and CPPIB though there's no certainty. When contacted by TOI, Bharti and KKR declined to comment while CPPIB could not be reached immediately.

Last year, KKR's billionaire co-founder Henry Kravis and its India head Sanjay Nayar initiated talks with Bharti chief Sunil Mittal to discuss value unlocking moves as the telecom war loomed. KKR made an initial pitch for Bharti's African operations which came through the acquisition of Zain, but the proposal was dropped due to a valuation mismatch. KKR and Bharti then began discussions over the telecom tower unit. Bharti also holds an interest in Indus Towers, a three-way joint venture with Vodafone and Idea Cellular.