Xavier Niel spends US$1.3 billion on Tele2 stake

Swedish investment company Kinnevik on Monday announced it has agreed to sell its entire holding in Tele2 – 19.8% in total – to Freya Investissement, a vehicle jointly controlled by France-based telecoms group Iliad and Niel himself, via NJJ Holding.

In local currency it's a 13 billion kronor deal, which when average prices of Class A and B shares are taken into consideration implies a 13% percent premium to Tele2's Class B closing price in Stockholm on Friday. The deal will be carried out in three stages, assuming it clears all regulatory hurdles. The companies expect to get final clearances and carry out a reclassification of shares in the third quarter of this year, enabling them to carry out the final step, which will leave Iliad/NJJ with Kinnevik's full stake and less than 30% of Tele2's voting rights.

For Kinnevik the deal is about strengthening its cash position. But for Iliad (and NJJ) this is an expansion play.

"The Iliad Group and the Tele2 Group have a lot in common. We both believe in the power of innovation and the importance of an entrepreneurial mindset," said Thomas Reynaud, Group CEO of Iliad and director of Freya Investissement.

"Our business sector in Europe is highly demanding. So, we have a great deal of respect for what Tele2's shareholders, management and teams have achieved, and we're delighted that Kinnevik has chosen Freya as Tele2's new reference shareholder," he added. "We look forward to contributing to the next chapter of Tele2's growth story."

There's not a huge amount to go on in that comment, but it is a continuation of a theme for Iliad, which has undertaken a significant European expansion in recent years ostensibly on the back of buying into businesses with similarities to those already in the portfolio.

Niel bought a 6% stake in Belgium's Proximus in November last year via Carraun, claiming "a deep understanding" of the telco's business thanks to Carruan's experience with Eir in Ireland. Meanwhile, the core of his telecoms operation is in Iliad, which replicated a successful French model in Italy, and added to its footprint with the acquisitions of Play and later UPC in Poland. And via other investment vehicles Niel owns telecoms operations in Switzerland, Monaco, Cyprus and Malta.

Niel also claims a 2.5% stake in Vodafone, and recently announced the acquisition of Turkcell's operations in Ukraine. And rumours over his desire to buy into Portugal through Altice continue to swirl, but there are a number of names in the frame for those assets.

The size of stake, and accompanying voting rights, Iliad/NJJ is picking up in Tele2 suggests Niel will have some sway at the Sweden-based telco. This deal will be more about extending the Niel telecoms domain than spotting a purely financial opportunity, although Niel's not the type to overpay; clearly Kinnevik is a willing seller.

Tele2 has operations in its home market of Sweden, in addition to serving the three Baltic states: Latvia, Lithuania and Estonia. And crucially it tends to occupy a challenger position in all those markets, talking up its "more-for-more" approach in the Baltics and its ability to test the status quo domestically.

Tele2 is potentially a very strong fit with the Iliad ethos.